MONEY retirement planning

This Simple Strategy Can Help You Build a Successful Retirement Plan

Fox and hedgehog
Bob Elsdale—Getty Images

Should you be smart as a fox or wise as a hedgehog in your retirement planning?

No, it’s not a trick question. Nor a trivial one. Indeed, knowing whether you act more like a fox or a hedgehog can help you improve your approach to retirement planning, making for a more enjoyable pre- and post-career life.

The fox vs. hedgehog debate goes back to a statement attributed to the ancient Greek poet Archilochus: “The fox knows many things, but the hedgehog knows one big thing.” Alluding to that line, the philosopher Isaiah Berlin wrote a famous essay in 1953 titled, “The Fox and The Hedgehog.”

The idea behind the fox-hedgehog comparison is that you can divide people into two groups: hedgehogs, who see the world through the prism of a defining principle or idea, and foxes, who focus more on their experiences and the particulars of a given situation. You could say that hedgehogs are more likely to see the big picture, while foxes get into the weeds.

So what does this have to do with retirement planning?

Well, if you’re a fox, you’re always looking for some type of edge or way to exploit circumstances to your advantage. You track the ups and downs of the stock market with an eye toward getting in before a big upswing or out before a crash. You listen to investment pundits, hoping to score tips on stocks or sectors that are supposedly poised to outperform the market. Chances are you’ve been glancing at what the Dow and the S&P 500 have been doing as you’ve been reading this column.

In your continuing efforts to gain an edge, you’re also constantly on the lookout for exciting new investment opportunities—smart beta ETFs, the Bitcoin Trust, whatever—and revolutionary techniques that can enhance your reitrement-planning efforts. You probably believe that finding the best investments is the single most important thing to do to build a sizeable nest egg, when diligent saving actually trumps savvy investing.

If you’re a hedgehog, on the other hand, you’re probably more apt to believe that successful retirement planning comes down to following a few simple principles: saving regularly (preferably by putting your savings on autopilot), making the most of tax-advantaged accounts whenever you can and, to the extent possible these days, not pulling the trigger on retirement until you feel you have a large enough nest egg to give you a good margin of safety on withdrawals (as opposed to relying on some investing black-magic that’s supposed to help you squeeze more out of your assets).

As for new products and cutting-edge strategies, the hedgehog views them with more than a little skepticism and is more likely to see them as a gimmick or distraction than a can’t-miss opportunity. As a hedgehog, you believe it’s unlikely that the Next Big Thing can significantly improve on time-honored strategies like looking for ways to save a bit more, reining in investment costs and building a basic stocks-bonds portfolio that you rebalance periodically. So you’re more likely to pass on the latest fad, knowing that in the financial world, fads come along pretty frequently, and often leave disappointment in their wake.

Full disclosure: I’m primarily in the hedgehog camp. Thirty years of writing about retirement planning and investing has convinced me that true innovation is pretty rare, and that “sophisticated” strategies is often another way of saying “expensive” strategies. I believe that if you get the Big Things right—you save regularly, invest sensibly, set reasonable expectations and monitor your progress—you don’t have to resort to fancy techniques that too often have the potential to blow up on you.

That said, while we may live in a digital world, we humans are not digital. We’re analog. No one is solely a fox or a hedgehog. We may be more one than the other, but we have elements of both. And I think that whether you consider yourself mostly a fox or a hedgehog, you can learn from the other.

If you’re primarily a fox, for example, you might occasionally want to pull back and take a big-picture look at your retirement planning. You want to be sure that have a sound basic strategy in place and that you’re not undermining it by chasing every new product or approach that comes along. To help you improve your focus, you’ll probably want to cultivate some of the hedgehog’s skepticism.

Conversely, if you’re a hedgehog, you want to be careful that you don’t let your wariness about The New New Thing completely shut you off to the possibility of innovative approaches that may improve your planning and your retirement prospects. Truly transformative products, services and strategies may be rare, but they do come along.

ETFs have helped many investors lower investment expenses and their tax bills. New tools that can help you decide when to claim Social Security—which you can find in RDR’s Retirement Toolbox—really do have the potential for dramatically improving many people’s standard of living in retirement. You don’t want your “hedgehoggish” tendency to view the world from 30,000 feet make you overlook something at ground level that that may prove helpful to your planning. To prevent that from happening, try to think like the fox sometimes.

So the next time you’re contemplating your retirement planning, be sure to think like a hedgehog and make sure you’ve got a good overall retirement plan in place. Then make like a fox and see whether there’s anything worthwhile new or interesting that might help you improve your plan, even if incrementally.

Doing this will help you see from both fox’s perspective and the hedgehog’s. And you’ll reap the benefits of thinking, shall we say, like a hedgefox.

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TIME Crime

Man Accused of Running the First Ever Bitcoin Ponzi Scheme

He allegedly raised the digital equivalent of $4.5 million by offering insanely high interest rates

A Texas man was charged with fraud in New York on Thursday, in what federal authorities claim is the first-ever Ponzi scheme involving the unregulated digital currency Bitcoin.

Trendon Shavers, 32, who runs a company called Bitcoin Savings and Trust, allegedly raised the equivalent of $4.5 million by offering investors weekly interest rates of 7%, Reuters reports. That translates to a 3,641% annual rate of return.

Shavers is suspected of embezzling about 146,000 of the 764,000 bitcoins he raised between Sept. 2011 and Sept. 2012 and allegedly using the proceeds to buy a BMW sedan, spa treatments and a $1,000 steak dinner, among other things.

If convicted, Shavers could serve up to 20 years in prison.

“This case, the first of its kind, should serve as a warning to those looking to make a quick buck with unsecured currency,” said U.S. Attorney Preet Bharara in a statement.

[Reuters]

MONEY Bitcoin

Why Bitcoin Fans Don’t Believe in Bad News

People attend a Bitcoin conference on at the Javits Center April 7, 2014 in New York City.
Andrew Burton—Getty Images

Bitcoin might be doing poorly, but for the currency's online proponents, it's always time to buy. Here's the reason behind their optimism.

Updated—Friday, October 10

Last weekend, Bitcoin crashed. The dollar value of a single Bitcoin began to decline on electronic markets starting on Friday and by Sunday afternoon had fallen 14%, to $290.

It recovered a bit in the days that followed, but the slide appears to part of a broader trend: At the Thursday price of about $350, the digital currency has lost almost 70% of its value since its all-time high of $1,147 in December 2013. At the New York Times, Paul Krugman used the roller coaster weekend as an occasion to once again call Bitcoin a long con.

But among the Bitcoin faithful, the sun never stopped shining. On Reddit’s Bitcoin discussion board, for example, home to almost 140,000 enthusiasts of the electronic currency, the price drop was framed as good news. “The good old days are back! Massive walls, manipulation and a true financial wild west – I love it” chirped one of Monday’s most popular posts.

“Who else is enjoying the firesale?” asked another popular participant who claimed to be “picking up tons of cheap bit coin.”

How to explain the eternal optimism? Is it possible that Bitcoin’s most dedicated fans are simply more tuned in to the currency’s long-term potential than the broader market and therefore have a more favorable view of its true value?

Sure, it’s possible — but Meir Statman, a professor at Santa Clara University specializing in behavioral finance, has a more plausible explanation for the findings: Confirmation bias. In short, he says, Bitcoin communities tend to be echo chambers of optimism, giving their members a false impression of the currency’s true value. “What you hear, really, is what you want to hear; what is easy for you to believe: That bitcoin is going to take over and banks are a thing of the past,” explains Statman. “And when you have people who reinforce it, people are not looking for the truth, they are looking for views that are going to support their prior beliefs driven by ideology and self interest and so-on.”

This explanation would seem to be supported by a recent study of Bitcoin users by researchers at the University of Illinois, who found that those who participated in online Bitcoin communities were far more bullish about the currency’s future price than other Bitcoin holders. When asked about the long term value of Bitcoin (which the survey defined as the coin’s price in early 2019), users who talked about Bitcoin on various online platforms produced estimates 68% higher than those who did not.

Screen Shot 2014-10-08 at 10.11.02 AM
An r/Bitcoin user asks (and receives) reassurance following a December, 2013 price crash.

Of course, that’s not a phenomenon unique to Bitcoin or online forums. “There is a similar finding about communities where people describe their investment success more generally, because people tend to brag about their success and not brag about their losses” the professor warns. “If you are not careful, all you hear is that people are making tons of money.”

Statman suggests yet another psychological explanation for the behavior of the Bitcoin community, noting that many people who invest in Bitcoin — and other alternative assets like gold — do so in part because it fits their broader global outlook and ideology. “It is fair to say that lots of the people who invest in gold invest in a view of the world: That the United States is going down, bad things are going to happen, inflation is going to rise,” Statman says.

That makes hard truths particularly difficult to accept, he says. After all, divesting from a stock is easy. Divesting from a world view, well, that’s a lot more painful.

Statman advises investors of all types to avoid confirmation bias and “ideological” investing by talking to people with different perspectives. For example, he jokes, Bitcoin buyers should have asked his opinion of the currency before last weekend. His take: “I think it’s a scam.”

After being contacted by Bitcoin advocates, Statman clarified his position to MONEY. “My initial thought when I heard about Bitcoin from my students is that is a scam. I know now that the technology of Bitcoin might prove useful but I am puzzled by the rush to it.”

TIME Innovation

Five Best Ideas of the Day: October 8

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. Quotas can cause lasting change. Rwanda’s new parliament is more than 60% female.

By Eleanor Whitehead in This Is Africa

2. With open communication and smart procedures, we can contain Ebola.

By Atul Gawande in The New Yorker

3. A simple plan to begin saving for college at kindergarten helps families thrive.

By Andrea Levere in the New York Times

4. Teach For America is sewing seeds for education reform in unlikely places – by design.

By Jackie Mader in Next City

5. How Bitcoin could save journalism and the arts.

By Walter Isaacson in Time

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY Bitcoin

Bitcoin’s Price Plummeted Over the Weekend

A woman buys bitcoins at one of Southern California's first two bitcoin-to-cash ATMs.
Lucy Nicholson—Reuters

The price of Bitcoin dropped almost 20% over the weekend, hitting a low of $290 before rebounding.

Bitcoin enthusiasts had a scare this weekend, as the price of the currency plummeted from $356 on Saturday to a low of $290 on Sunday—a drop of more than 18%, percent according to CoinDesk’s Bitcoin Price Index. The virtual currency has since rebounded to a price of roughly $330 at press time Monday, down about 13% over the last seven days.

Despite the price drop, Reddit’s r/Bitcoin, a popular gathering place for the currency’s supporters, was largely optimistic. “Who else is enjoying the firesale? Who else is picking up tons of cheap bitcoin?” asked one poster. But not everyone was confident that the price would recover. The New York Times quoted one worried user asking fellow Bitcoin fans for support. “As the price is going down, some of us are under immense psychological stress,” the post read. “Please share how you cope with it.”

Sunday’s crash was hardly Bitcoin’s first price panic, or even its most significant drop. In 2013, the currency lost almost 40% of its value between December 4 and December 7, when the price dropped from its all-time high of $1,147 to $694 in less than a week. After partially regaining those losses, Bitcoin fell 40% again from December 15 to 18, going from $879 to $522. Since the beginning of this year, Bitcoin’s price has been relatively more stable, but the descent has continued. From January through October 6 of this year, the currency has lost more than 40% of its value.

Exactly why the price cratered is subject to debate. Some have cited upcoming regulations, such as those proposed by New York’s Department of Financial Services, that will curtail the free-wheeling nature of the currency. Others have suggested that Bitcoin’s recent increase in popularity among retailers may have actually hurt its value. Paul Vigna at the Wall Street Journal theorized that because more merchants are using a service that instantly converts Bitcoin payments into dollars, all those Bitcoin sales may be driving down the price. However, as Vigna notes, such a long-term trend can’t directly explain this weekend’s sudden crash.

Bitcoin detractors have used this latest price fluctuation as a chance to take something of a victory lap. On Sunday, Paul Krugman, a longtime cryptocurrency critic, likened Bitcoin to a number of get-rich-quick schemes, from Glenn Beck’s “buy gold” ads to direct mail scams. “Bitcoin may be sold as a technical marvel, and it does indeed solve an interesting information problem,” acknowledged Krugman, but “it’s not at all clear whether solving that problem has any economic value.”

Other Bitcoin watchers say the hiccups may only be temporary. Rafael Corrales, a partner at Charles River Ventures, argued in the Times that recent Bitcoin price fluctuations are the result of its “transition stage” between between speculative vehicle and actual currency: “When Bitcoin becomes a currency, it realizes its potential.”

TIME cybersecurity

Nearly 5 Million Google Passwords Leaked on Russian Site

Google Reports Quarterly Earnings
A sign is posted outside of Google headquarters on Jan. 30, 2014, in Mountain View, Calif. Justin Sullivan—Getty Images

The usernames and passwords of 4.93 million users were posted in a Russian Bitcoin security forum

Almost 5 million usernames and passwords purportedly for Google accounts were uploaded to a Russian online forum by hackers late Tuesday.

The International Business Times reports that data for 4.93 million Google accounts of English-, Spanish- and Russian-speaking users was leaked and published on a Russian-language Bitcoin security online forum. The posters said about 60% of the accounts were active.

In a statement sent to TIME, Google said it had “no evidence that our systems have been compromised.”

“The security of our users’ information is a top priority for us,” the statement reads. The company said that whenever it is alerted that accounts may have been compromised, “we take steps to help those users secure their accounts.” Email users are encouraged to utilize two-step verification when logging into accounts, as well as to create strong passwords.

According to Russian news service RIA Novosti, this leak followed another large hack of Russian email accounts. Several million accounts of Russia-based email services were also posted in a Bitcoin security forum.

MONEY Bitcoin

Uber, Airbnb, and Others May Soon Accept Bitcoin

Bitcoin
Lucy Nicholson—Reuters

Customers may soon be able to use bitcoin for a variety of web services if a new deal involving an Ebay-owned payment processor goes through.

Bitcoin fans, rejoice. A new deal between a Paypal subsidiary and digital currency companies may soon allow customers to pay for Uber, Airbnb, Opentable, and other services with digital currency.

The Wall Street Journal reports that Braintree, a payment processor Ebay acquired last year, is in negotiations with businesses like Coinbase that allow consumers to store, buy, and send bitcoin, a digital currency that can be either “mined” using computing power or purchased with dollars. Braintree is currently part of Ebay’s Paypal unit. If these negotiations are successful, Braintree’s clients would be able to accept bitcoin payments.

If Braintree does enable clients to start taking bitcoin, they would not be the first to do so. Overstock.com was the first large company to accept bitocoin payments; and Dell, technology retailer Newegg, and satellite TV provider Dish Network, have all followed suit. Most of these services have also partnered with Coinbase.

While the currency has seen increased adoption, not all developments have been positive. In July, New York’s Department of Financial Services proposed new rules for virtual currency businesses that sought to reduce illegal activity—which bitcoin has previously facilitated—and increase consumer protections for the currency’s users. While some have lauded the rules as an important first step toward making bitcoin a viable currency, other bitcoin advocates slammed the regulations for eliminating bitcoin’s anonymity and their arduous requirements on certain businesses.

Bitcoin has also not fared well in terms of price. After the value of one bitcoin (BTC) peaked at over $1,100 in late 2013, its price has come crashing back to earth. As of today, one BTC is worth $512; down from $747 at the beginning of this year.

TIME Virtual Currency

How Bitcoins Could Put Your Finances at Risk

Virtual currencies could cause you to lose "real" money, according to a new report

The Consumer Finance Protection Bureau released a report Monday concluding that virtual currencies, such as Bitcoin, offer less protection than regular currencies and can be vulnerable to outrageous mark-ups, online scams and hackers.

In addition to publishing the report, the bureau has also added a virtual currency section to their complaint page where people who have run into problems with Bitcoin or other similar currencies can register their issues.

According to Bitcoin.com, there are more than 13 million units of virtual currency around the world.

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