The U.S. Retirement Crisis: Essential Reading and Resources

CFALauren Foster of the CFA Institute asked Wade Pfau, Michael Kitces, David Blanchett and I to suggest some resources for advisors dealing with retirement.  What we suggested and a lot of other good stuff are available here.  I think it’s well worth your reading.

The U.S. Retirement Crisis: Essential Reading and Resources


More on Dave Ramsey

Dave Ramsey 2After I wrote my Dave Ramsey piece yesterday (Math Suckage and Dave Ramsey), my friend Wade Pfau, a Princeton Ph.D., a CFA, and Professor of Retirement Income in the new Ph.D. program for Financial and Retirement Planning at The American College, wrote a piece on Ramsey and his suggested 8 percent retirement withdrawal rate: Dave Ramsey’s 8% Withdrawal Rate. My post noted that an 8 percent retirement withdrawal rate is “crazy,” but I focused on the 12 percent return assumption.  Wade deals with Dave’s withdrawal rate nonsense head-on. He pulls no punches. Continue reading

Struggling With Clients

Cover Apr_0413.inddMy newest column is now available from Research magazine. Here’s a taste.

As [The Wall Street Journal’s Jason] Zweig emphasized, we are all social animals. It is natural and inevitable for most people to measure their success and status against their peers, and advisors are people, too. Yet the advisor who loses business to the competitor proposing an unrealistic approach and envies him “has already lost the battle. [Warren] Buffett likes to say that companies get the shareholders they deserve. Ultimately, every advisor has to be reconciled to the perennial truth that you get the clients you deserve.”

Surely the best advisors will need to listen more carefully, to provide excellent advice and recommendations based upon the most thoughtful research, and to make their points in a way that resonates with clients both intellectually and emotionally. That’s far easier said than done, of course. Long-term financial and retirement planning is difficult business. As Dana Anspach sagely added, “It is hard to plan for something when you don’t want it to happen.” Indeed it is.  

Struggling With Clients

Retirement: Winning the loser’s game

My latest piece for MarketWatch is now available.  Here’s a taste:

This need to avoid investing errors is particularly relevant to retirement planning. More retirees use systematic portfolio withdrawals to provide needed income than any other strategy by a large margin . The common rule of thumb is the so called “4% rule,” which generally postulates that one should be able safely to withdraw an inflation-adjusted 4% from a diversified portfolio of between 50% – 75% stocks annually and have the portfolio last for 30 years to roughly a 90% – 95% certainty.

However, recent research (summarized here and here ), much of it by my RetireMentor colleague Wade Pfau , “suggests that the sustainable withdrawal rate for retirees in 2000 could be much closer to 2% than to the 4% safe withdrawal rate rule-of-thumb.” The problem is largely on account of ” sequence risk .”

Retirement: Winning the loser’s game


Worth Reading

I commend some recent articles to your attention.

A Very Nice Honor

Michael Kitces published a piece in Investment News today recommending 11 investment blogs for financial professionals, including Above the Market in the 11.  I’m in very good company with Michael’s Nerd’s Eye View, Tadas Viskanta’s Abnormal Returns, Wade Pfau’s Retirement Researcher Blog, and Josh Brown’s The Reformed Broker, You should read them all regularly.

Guarantees v. Control

My friend Wade Pfau has some new material available at his blog concerning the trade-offs between income guarantees on the one hand and personal control of one’s assets on the other as they relate to retirement income planning.  I have linked them below.  As usual, Wade’s work in both interesting and helpful.  As Wade notes, “It seems like retirement income strategies boil down to where you want to fall on the spectrum between having control of your assets and hav[ing] guaranteed (inflation-adjusted) protections for life.” 

I agree.  But I would add that more control over one’s assets necessarily means being more susceptible to random — potentially negative and perhaps disproportionately negative (on account of statistical “fat tails”) — outcomes and thus (paradoxically) less ability to “control” one’s life in the long run. 

I encourage you to read these posts and all of Wade’s (exceptional) work.

Guarantees vs. Control

On the Pros and Cons of GLWBs

Safe Withdrawal Rates: Have I been barking up the wrong tree?

Retirement Savings Rates

Some excellent resources on how much to save for retirement: