Byron Sanders All posts by Byron Sanders

Byron Sanders
Emerging thoughts on retirement income

We recently attended the DFA Annual 401(k) Conference in Chicago. A revelation  gaining wide acceptance in the industry is that retirement plan goals must shift from asset valuations and returns to an assessment of a participant’s retirement income requirements:  sustainable future income. While this paradigm shift is ongoing among professionals, participants are still behind the curve. DFA’s Managed DC platform, which was conceived and designed by Nobel Laureate Robert Merton is the most visible effort we know of to help and encourage 401(k) participants to focus on income rather than asset value.

The Harvard Business Review article linked below  discusses the above points as well as how plan participants who concentrate on an income goal can be influenced to increase savings rates. Retirees don’t spend asset values, they spend the income that can be generated by those values. Failing to identify and target realistic income steams during the accumulation phase can have dramatic negative consequences.

Merton’s comments about risk are particularly insightful in view of recent papers and articles that have suggested individuals in the distribution phase should extend pre-retirement risk levels for longer periods. The reasoning is that longer expected lifespans argue equities (i.e. risk) are necessary to increase probabilities that retirees will be able to maintain purchasing power.

The idea of using annuity units as a yardstick for the amount of future sustainable income  is a powerful counter to this argument. Once an individual has amassed a pool of assets that enables purchase of a deferred annuity with sufficient future income distributions, taking and accepting risk becomes a less important consideration.


Byron Sanders
Digital Medicine Coming to a Phone Near You

Over the past year, we’ve heard several times that a new age in medicine is dawning.  Specifically,the focus of medicine is evolving from treatment of the sick to prevention of illness; health care instead of sick care. A greatly enhanced ability to individualize treatment based on unique personal characteristics combined with the power of digital communication facilitated by smartphones is imminent.  These advances will change all our lives.

The implications of extended client lifetimes for our business  cannot be overemphasized.  The probability that average lifespans will increase significantly within the next 5-10 years calls for reexamination of the meaning of retirement income.  We’ll be hearing and talking more about this subject in the coming months.  The article linked below appeared in today’s Wall Street Journal.

Robin Cook and Eric Topol_ How Digital Medicine Will Soon Save Your Life – WSJ

Byron Sanders
3D Printing becoming a reality in new areas

Happy New Year to all!


I’ve discussed with many of you my belief that 3D printing is going to be a major paradigm shift in how manufacturing is conducted and ultimately be a factor in bring manufacturing back to US shores.  Even at this stage after several years of publicity, the processes and concepts of the technology are not understood by vast segments of the population.  One of the most intriguing aspects is the possibility of printing actual replacement organs.  I came across the article linked below over the weekend.  As Peter Diamandis stressed in his book and presentations, many of the applications for 3D printing are very, very close to reality. I’ve also linked to a TED talk from March 2012 that will be of interest.  Enjoy!


Byron Sanders
Happy New Year?

An article in this weekend’s edition of the WSJ presents the first round of predictions for 2014’s equity market performance.  While most of those interviewed are moderately bullish,  no one is anticipating a year as strong as 2013.  The main reason seems to be statistical.  Since the early 20th century only one 20%+ up year has been followed by another 20%+.  The average followup year is around 6%-7%.

Most  will recall the mood a year ago.  Pending Sequester cuts, tax increases and a weak economy added up to an impending big selloff for most prognosticators.  So far, 2013 has seen the S&P 500 post its biggest year in a decade.  Wonder what those interviewed in the article were saying last year at this time?

We’re certainly not prepared or able to predict what the equity and/or bond markets will deliver in 2014, but then no one else is either.