Nota Bene
I am not a financial or tax advisor. Take everything I say with a grain of salt and do your own research and find professionals for additional help.
Facts
Options for retirement
* 401k
* Employer sponsored retirement account
* Invest a percentage of salary
* Typically involves an employer match of 3%-5% (https://www.fidelity.com/learning-center/smart-money/average-401k-match)
* Invest in small set of mutual funds
* IRA
* Individual Retirement Account
* Invest your money
* Depending on manager can invest in the whole market
* Mutual funds, stocks, bonds, options, real estate, infrastructure, etc.
* Different types of accounts - Traditional vs. Roth (https://investor.vanguard.com/investor-resources-education/iras/roth-vs-traditional-ira)
* Tax advantaged accounts with eligibility and contribution requirements.
* Traditional
* Deposit pre-tax, withdrawal as income tax
* Advantage
* Income tax bracket lower in future than today
* Can use for a regular expenses
* Have more money to invest sooner
* Roth
* Deposit post-tax, withdrawal tax free
* Advantage
* Can withdrawal for bigger expenses
* Can also be valuable if you expect taxes to go up in the future or to be in a higher bracket
* Limitations on when you can withdrawal and have minimum distributions after retirement
* Other Accounts
* Brokerage Account
* Can invest in the whole market
* No limitations on deposit/withdrawal levels or timing
* Involves various capital gains taxes
* Various bank accounts
* Low profits, but limited risk
Stocks
* Ownership claim in the company
* Includes certain rights to the company
* Voting rights at shareholder meeting - offer proposals, vote for directors, etc.
* Rights to certain financial information
* Limited rights to dividends - especially if board is unjustified in not holding reserves
* Profits
* Can gain cash dividends - there are companies specifically meant to generate dividends.
* Some stocks can pay dividends as high as 9%
Bonds
* Debt obligations against company
* As I've argued these are not usurious
* Pay a lump sum and receive interest or "coupons" relative to the "face" and at the end of the term receive the face back
* Paying for a series of payments
* Similar to the medieval census contract
* Very different rights
* Generally don't involve rights over the company like stock
* Can include certain obligations
* In default, typically a hierarchy of seniority, more senior bonds are paid first while more junior bonds paid after, if nothing left after paying seniors then juniors may get nothing
Mutual Funds
* Company that invests in a range of different securities
* Various types of mutual funds
* Active/Passive
* Stocks/Bonds/Mixed etc.
* Investing in fund not underlying assets
* Investor does not own underlying assets
* Investor owns shares in the company itself
* Voting rights
* Stock give you shareholder voting rights
* A mutual fund investor doesn't own the shares, so never had the rights
* However, some mutual funds are allowing investors a say in voting
Morality
Investment is a moral act and not merely technical
* Need to consider not merely the return but also the morality
Is saving for retirement good?
* Yes.
* Similar to any other future planning we do.
* Buy food to save for tomorrow, save money for expenses tomorrow
Benefits of retirement savings
* Prepare for future expenses
* Share with family in retirement
* Provide for living closer to children, supporting children in retirment
Other Moral Considerations
* Vast Range Of companies to invest in
* Money in companies do evil
* need to consider moral principles
* Legitimate Cooperation with Evil Criteria
* Cooperator’s act must not be intrinsically evil
* Cooperator is motivated by good intention
* Cooperator’s reason proportionate to (i) gravity of perpetrator’s wrongdoing and (ii) his proximity to wrongdoing
* Principle of Double Effect Criteria
* Act considered independently of evil effect is not intrinsically evil
* Agent intends good and does not intend evil as an end or as a means
* Agent has proportionately grave reasons for acting
