Join our community of smart investors

The retirement decision

One of these reasons is that I don't know how much money I'll want after I retire. This isn't simply because I might need to go into a care home. It's because my tastes might change. Yes, I could get by quite nicely if my future spending resembles that of the past two years. But will it? When I do retire, I'd like to take a holiday abroad (for the first time since 1993). What if I get a taste for such ventures? Or what if I find that I spend more day to day when I'm not chained to a desk? Or what if, being able to get out more, I meet someone and want to spend money on her?

One finding in behavioural economics is that people are prone to what Matthew Rabin at the University of California at Berkeley calls projection bias: we project our current tastes into the future and so under-estimate the extent to which our preferences will change. This is why convertible cars sell better in summer than in winter, and why houses with swimming pools fetch a higher price in good weather - it's because we assume that our summer preferences will persist.

To continue reading...
Join our Community of Smart Investors
  • Independent full-length company analysis
  • Actionable investment ideas and recommendations
  • Expert investment tools and data
  • Stock screens from Algy Hall
Have an account? Sign in