Researchfrom the Alliance for Lifetime Income shows that individuals’ concerns about financing their retirement increased during the pandemic. Eighty percent of American pre-retirees are at least somewhat anxious that their savings may not provide them enough to live on in retirement.
Gaining Perspective, featuring: William Reichenstein of IncomeSolver.Com, 10/12/21
We published an article in late September,Pay Attention to Marginal Tax Rates and Not Tax Brackets, that highlighted how the analytic framework for providing retirement income planning advice can be improved. It focused on three decisions that investors sometimes need to make: (1) whether to convert funds this year from a tax-deferred account (TDA), like a 401(k), to a Roth account; (2) whether to contribute this year to a TDA or a Roth account; and (3) how to tax-efficiently withdraw funds in retirement, where withdraw is interpreted broadly to include Roth conversions. The author of that article is with me today to discuss how advisors should approach those decisions.
Retirement Income
Seven Least Expensive States Based on Retirement Healthcare Costs
Since healthcare costs are the number one fear in retirement for Americans, this article will focus on which states are the least expensive to retire in based on healthcare costs.
The Emperor of All Risks
Because the consequences of leaving longevity unmanaged are likely to be the most devastating, advisors must act now to address it.
How I Protect Against the Coming Market Crash
Those who are familiar with my articles know that I see market crashes in stocks and bonds occurring in this decade, combined with serious inflation. Readers ask how I recommend protecting. This is it.
Real-Life Strategies to Mitigate Sequence-of-Return Risk
I’m going to review the research on safe-spending rates and then critique common methods of risk mitigation. I’ll offer the practical methods to reduce sequence-of-return risk that I suggest to my clients.
64% of workers worry about Social Security availability
A retirement income plan can simplify Social Security and boost retirement plan success. Get our insights to help your clients and their workers succeed.
Are You Selling a Verb or a Noun?
Meet a woman driven to change investment regulation and understand why it’s important that she succeeds.
How to Handle the DOL’s New IRA Rollover Rule
How are advisors coping with the new Department of Labor (DOL) rollover rules? Here are a dozen observations.
Don’t Believe in the “Safe Withdrawal Rate”
A fatal shortcoming lies beneath the academic papers that have relied upon “back-testing” to promote the 4% rule. Use our Premium membership service to add your logo and send this to clients.
The Elusive Benefits of “Lite” Annuities
This article explores the benefits of annuities with lower explicit fees, a category I dubbed as “annuities Lite” in a previous article that focused on GLWBs.
Crafting a New Retiree’s Tax Strategy
Retirement is the most important goal clients discuss over the course of their professional relationship with advisors. One key piece is the way in which taxes are paid.
The Urgent Changes to Improve Your RIA Website
Unless RIAs modify their communications strategies, the failure to address the need for retirement income communications will be felt for years.
The Income Annuity is the Constrained Investor’s Life Jacket
Imagine that you have joined some friends for a day of fishing. About two miles offshore, you sense that something is wrong. The small, single engine boat’s handling has changed. There seems to be more. Use our premium service to add your company’s logo and send this to clients.
The Ultimate Retirement Income Planning Guide for Advisors
As more and more people approach their golden years, you may see a shift in your practice—from a focus on accumulation and growth to one of income and distribution. It’s important that you’re prepared to not only ensure that your clients have enough to live comfortably, but to help them properly allocate the assets they have.
How to Think About Annuities
Depending upon the annuity that is being recommended and its purpose, your discovery process should include these questions. This article is written for clients and can be forwarded to them using our Premium Membership Service.
Millennials Save for Retirement Years Earlier Than Boomers — Because They Have To
Millennials took one look at their financial future and, early on, realized it was bleak. The YOLO generation started saving for retirement — stuffing away money in 401(k)-type accounts — nine years earlier than their baby boomer parents did, according to a new study.
Helping Clients Determine When They Can Retire
Can I afford to retire? Is it the right time? Here is how I answer those questions from my clients.
Why RIAs Are Going to Lose in Retirement-Income Planning
Does the scenario below sound likely? If so, you are among the thousands of RIAs who are likely to lose significant assets over the next decade.
GLWB Lite: Lower Costs but Much Worse Benefits
While the lower fees associated with GLWB Lite products make them seem more attractive, the expected income is significantly lower than other annuities.
How to Plan Retirement Income for a Constrained Investor
In this article, I will explain how to structure an income strategy that best serves the needs of constrained investors. Demographic, economic, cultural, and social forces argue for a new approach to retirement planning.
2025: The Post-Ken Fisher World of Annuities
RIAs must align their communications, planning methodologies, and product set with the needs of retirees, especially women, whose chief priority is reliability of income more than return on investment.
Highlights From Our Market Outlook Summit
Watch replays for CE credit. We recap the webinars presented at our Market Outlook Summit.
Demographics, Gender and Wealth: Profiting from The Retirement Income Revolution
The ‘Great Retirement’ Disconnect That Puzzles U.S. Economists
The pandemic pushed millions of older Americans out of the labor force. It should have spawned a surge in Social Security benefits applications — but it hasn’t. Perhaps because they aren’t retired.
Wednesday's Weekly Perspective: March 23, 2022
ICYMI: In this roundup, we’re highlighting the five most popular pieces of content from the previous week.
The New Defined Contribution Landscape
The pandemic hastens the evolution of the DC plan landscape and challenges plan sponsors to evolve.
PIMCO Updates Its 2022 Glide Path for Target Date Funds
PIMCO’s glide path for target date funds expresses the firm’s collective view on age-appropriate asset allocation that can help prepare defined contribution (DC) plan participants for successful retirements.
How Are Those Retirement Plans Going Now?
Even before Russia invaded Ukraine the economy felt pretty dicey. There was inflation, a weird post-pandemic job market, and the prospect of a more hawkish Fed. Now markets are even more volatile as sanctions roil the global outlook. For anyone counting the days until retirement, it's been a harrowing ride.
The Intuition for Reverse Mortgages
Understanding how reverse mortgages can add value in retirement planning requires an understanding about the peculiarities of sequence-of-return risk that the reverse mortgage can help to manage.
Wednesday's Weekly Perspective: March 2, 2022
ICYMI: In this roundup, we’re highlighting the five most popular pieces of content from the previous week.
The Fallacy of Lumping Millionaires with Billionaires
Those intending to shame or attack "the rich" commonly make an absurd comparison when they lump together "millionaires and billionaires."
Investment-Only Variable Annuity – A “Back-to-the-Future” Variable Annuity Vehicle
Interest-only variable annuity policies have zero commissions, no surrender charges and low annual M&E and admin fees plus various subaccounts that span traditional and alternative investment strategies.
The Five Strategies for Retirement Income
Advisors can choose from five approaches to meet their clients’ income needs in retirement, each with its own merits and drawbacks. Those strategies attempt to solve for a central goal – ensuring that clients don’t run out of money – a risk that is illustrated by my wife’s catering business.
Why Critics of Bucketing Strategies are Wrong
Advisors who reject bucketing strategies because they won’t invest as many as five years of assets in low-yielding securities are exposing clients to risks that threaten their standard of living in retirement.
The Three-Legged Stool of Misguided Investment Decisions
A practice built on a stool of products, pricing and performance is doomed to collapse. Competent planning requires a focus on the deeper issues your clients face.
Risk Intolerance Dooms Retirement Savings
Millions of Americans are unprepared for retirement because of risk intolerance, creating a massive societal cost.
Will Higher Inflation Harm Retirees?
Those nearing or in retirement are worried about what higher-than-expected inflation will mean. Here are a few things to consider to temper their anxiety.
2022 Municipal Market Outlook: Checkers vs. Chess
As we examine the municipal bond “board” at the start this new year, it looks to us to be a more challenging one than a year ago. More like chess than checkers. Winning will likely require a more complex, multi-faceted strategy than in 2021.
The Trial of Ken Fisher for Crimes Against Annuities
I have charged Ken Fisher with crimes against annuities. I will begin this proceeding by expressing my gratitude for his anti-annuity advertising campaign including its famous tagline, “I hate annuities and you should too!”
How DC Plan Sponsors Can Engage Diverse Participant Personas
Millennials often say their biggest challenge is being lumped into one category, as if everyone’s needs and aspirations are identical.
How Worried Should I Be About Soaring Inflation?
Supply-chain problems became the almighty boogeyman in 2021 alongside Covid, and now its partner in crime, inflation, is the thing causing anxiety. The Consumer Price Index rose to 7% in December 2021, which is the highest it’s been since the early ’80s. But should the typical consumer be worried about inflation?
The “Impossible” Scenario that Threatens Retirees
The decade-long bull market has infected advisors and their clients – especially those in or nearing retirement – with a dose of complacency that hides the perilous outcomes most consider impossible.
Wall Street's Model Portfolios Are Misunderstood
Large asset managers provide model portfolios for many purposes — as options in 401(k) plans, as blueprints for institutional clients and affiliated financial advisors, and as suggestions for unaffiliated investment advisors. These have the “lather, rinse, repeat” conflict of interest.
Man, You've Got This! Or Maybe Not
If a recently widowed client hasn’t fired you, then you are among a lucky few. Here’s a thought experiment that illustrates the vulnerability advisors face when they don’t engage the female half of a couple.
Wall Street’s ‘Model Portfolio’ Boom Gets Slammed in New Paper
A booming $4.9 trillion branch of the U.S. asset management industry is funneling investor cash into funds that are pricier and worse-performing than alternatives, new research claims.
Can You Afford to Join the Great Resignation?
Many of us fantasize about quitting our jobs. In 2021, more people than ever turned that dream into reality. The latest U.S. Bureau of Labor Statistics data show that 4.53 million Americans voluntarily left their jobs last November. This was both a new monthly record and the eighth successive reading above the pre-pandemic high.
How Safe Assets Became Investors' Biggest Risk
Markets are weird right now. The value of risk-free assets has gone all out of whack, and if that doesn't seem scary, keep reading.
Investment Advice is not Financial Planning
Investment advice is not financial planning. This is an important distinction to understand when someone goes shopping for financial advice. Do they only need help with investment decisions, or do they need guidance on all aspects of their financial life?
How the Fed is Saving Money Market Funds
By expanding its use of reverse repurchase agreements to nearly $1.6 trillion, the Fed has kept money market funds solvent and prevented a systemic failure.
Reverse Mortgages Reduce Risk for Retirees While Increasing Wealth
A new study, which I co-authored, proves that a withdrawal strategy utilizing a reverse mortgage reduces market risk and increases portfolio growth.
A Revolt Against PE-Led Annuity Issuers
A Pittsburgh insurance broker and a Richmond, Virginia forensic accountant have developed an alternative rating system for measuring the ability of life/annuity companies to keep their promises even in market crises. They call it the transparency, surplus and riskier assets ratio, or “TSR” for short.
Our Top 10 Most Popular Investing Articles of 2021
As is our custom, we conclude the year by reflecting on the 10 most-read investment and planning articles over the past 12 months. Tomorrow, we will highlight the 10 most-read practice management articles.
The Key Trends in the Retirement Income Industry
Research from the Alliance for Lifetime Income shows that individuals’ concerns about financing their retirement increased during the pandemic. Eighty percent of American pre-retirees are at least somewhat anxious that their savings may not provide them enough to live on in retirement.
When Capitalism Died, And How Creditism Replaced It
Capitalism’s death warrant was signed on March 19, 1968. That is when President Lyndon Johnson eliminated the requirement that the Federal Reserve back the U.S. dollar with gold reserves.
Women, Retirement and What Still Needs to Be Done
It’s well studied that factors like debt and financial uncertainty impact the way people feel about retirement and prepare for it. In this series, BlackRock explores insights from our 2021 DC Pulse research and additional work with the Employee Benefit Research Institute (EBRI) to recognize inequitable effects and find ways to build a better retirement for all.
When Advisors Violate Their Fiduciary Duty
Advisors breach their fiduciary duty when they fail to recommend guaranteed income products.
Six Steps for Effective Social Security Claiming
Clients struggle with making right the Social Security claiming decision. This article provides a six-step process to guide clients through the complexity of Social Security.
Goldman Sachs Says Young U.S. Workers Are Plotting Early Retirements
They’ve only just entered the workforce, but a significant swath of the newest crop of U.S. employees are already making plans for an early exit.
Resolving the Conflicting Demands of the Optimistic Pessimist
How can advisors help clients who lack sufficient savings for retirement – those who accept the need to take on risk to achieve capital growth, but insist on a minimum income to fund essential expenses?
How to Improve Outcomes When Using a Time Segmentation “Bucket” Strategy
Time segmentation seems to be a more planful approach for creating a retirement income stream than simply taking three to four percent withdrawals from a portfolio of equities and fixed income (or higher if you read Bill Bengen’s recent article in this publication).
There is No “Safe Withdrawal Rate”
The justification for the 4% rule was based upon historical investment performance from 1925 to 1995. But what is the value of relying on those results when today’s economy is so different?
A Life-or-Death Moment for Financial Advisors
Depending upon the decisions advisors make in the near term, their practices will either be setup for monumental growth or inevitable decline.
Counting Calories Helps Your Retirement Account, Too
Before those celebrating Thanksgiving reach for a second slice of pecan pie, they should consider this: A 55-year-old woman with Type 2 diabetes will pay an average of $3,470 more a year in medical-related expenses, or close to $160,000 in total, than if she didn't have the disease.
Newsletter - November 2021
Enjoy the latest Newsletter from Harold Evensky.
How to Stop Inflation From Wrecking Your Retirement
Inflation is why the 4% rule never made any sense.
Should You Heed the Wall Street Journal’s Warning About the 4% Rule?
The Wall Street Journal recently ran an article revisiting an old retirement income rule of thumb. “The 4% Retirement Rule is in Doubt. Will Your Nest Egg Last? A well-established strategy for funding our golden years is no longer foolproof. Retirees need to get creative.”
How to Increase After-Tax Income for GLWB Annuities
The benefits associated with exclusion-ratio taxation can be significant and should be considered when selecting the appropriate GLWB annuity for a non-qualified account.
Why Retirement Risk Requires Dynamic Planning
Retirement planning is complex and risk in retirement is real. To improve the confidence clients have in working with an advisor, you need to prepare them for changes in retirement and avoid the talk of probability of failure and success. Ongoing adjustment-based planning aligns clients’ perceptions of risk in retirement with reality. This often results in small course corrections with many retirees finding they can spend more than originally planned. My guest, Justin Fitzpatrick, is here to discuss new research and technology that helps advisors paint a more realistic picture of what retirement could look like and guides clients through retirement more successfully.
How Dynamic, Tax-Smart Distributions Maximize Retirement Income
While an individual is working, taxes are primarily determined by their salary with only minor control by an advisor. However, once they transition into retirement, their advisor becomes a tax conductor, orchestrating timing and sourcing of cash flows and disbursals to maximize their safe, post-tax spending.
Higher Interest: Debt Influences Demand for Secure Retirement Income
It’s well-studied that factors like debt and financial uncertainty impact the way people feel about retirement and prepare for it. In this series, BlackRock explores insights from our 2021 DC Pulse research and additional work with the Employee Benefit Research Institute (EBRI) to recognize inequities and help find ways to build a better retirement for all.
For DC Plan Participants, Solving for Retirement Income Is a Challenge
After decades of saving for a comfortable retirement, plan participants eventually face the question of how to create an income stream from those savings. Most aren’t sure how to do that, even though income is the main reason they’re saving in the first place...
Median Household Incomes by Age Bracket: 1967-2020
We have updated our commentary on household income distribution to include the Census Bureau's release of the 2020 annual data. Our focus was on arithmetic mean (average) household incomes by quintile (and the top 5%) over the 50+ year history of this data series. The analysis offered some fascinating insights into U.S. household incomes. But the classification misses the implications of age for income. Households are by no means locked into the same quintile over time.
How the 4% Rule Undermines Advisors and Clients
There are three primary reasons the 4% rule is misguided and should be done away with when it comes to retirement spending.
Planting the Seeds for High Cash Flow, With 5 Years Until “Go-Go”
I was speaking with an industry friend and colleague the other day, and we got to riffing about music and retirement planning. A free and creative thinker, she said that when talking to clients about future retirement income, the sweet spot timing wise seems to be about five years before clients retire.
Ready or Not? Lifetime Income and Other Retirement Readiness Drivers
Saving for retirement is a decades-long endeavor with factors – both excepted and unexpected – that can affect confidence and preparedness. Even though much of the conversation has centered around amassing a nest egg, it’s also important to look at what else can be done to improve retirement readiness for all.
Best Practices for Retirement Income Planning + How a New Tool can Help
As the baby boomers reach retirement, advisors must solve new problems for them. And these new problems must be addressed with solutions that evolve to better manage them. Retirement income is different as clients shift their focus from maximizing wealth to creating sustainable income, clients face a greater range of risks, and clients increasingly must solve a complex lifetime financial problem. These matters are becoming particularly vital as near retirees are now experiencing continued market volatility and uncertainty, and historically low interest rates.
This presentation looks at sustainable retirement spending from investments in light of recent market events and discusses strategies to support more spending by integrating both investments and income protections, such as a new Portfolio Retirement Income Guarantee that unbundles the insurance from underlying investments to build more efficient retirement strategies.
The Importance of Marginal Tax Rates in Retirement Planning
We published an article in late September, Pay Attention to Marginal Tax Rates and Not Tax Brackets, that highlighted how the analytic framework for providing retirement income planning advice can be improved. It focused on three decisions that investors sometimes need to make: (1) whether to convert funds this year from a tax-deferred account (TDA), like a 401(k), to a Roth account; (2) whether to contribute this year to a TDA or a Roth account; and (3) how to tax-efficiently withdraw funds in retirement, where withdraw is interpreted broadly to include Roth conversions. The author of that article is with me today to discuss how advisors should approach those decisions.
The Retirement Income Sonnet
Given the demise of pension plans, and the potential for annuities to serve as a core source of retirement income certainty, I composed the following poem to mix a bit of levity with a purposeful message.
Tax-Efficient Retirement Distributions with Inheritance in Mind
Here is a discussion of taxes and legacy when estate tax is not a concern because asset levels are below the estate tax exemptions.
When Going Organic Might Be Thriftier: Funding Retirement Cashflow
When it comes to relative bargains in retirement cashflow, go organic and consider the role annuities play in bringing capital efficiency to a retirement-income strategy.
FICA Freedom Day: Get It on Your Calendar
You’re probably familiar with Tax Freedom Day®, which is April 16th this year for the country, according to The Tax Foundation. But are you aware of FICA Freedom Day? It’s the date when that first check arrives absent FICA deductions for Social Security.
On the Solvency of Social Security
Social Security’s shortfall grew by a record 18% in the last year. That $3 trillion increase means that it is more likely beneficiaries will face reduced benefits in the future, and the longer we wait the harder it will be to solve the problem.
Making It Last: Advanced Retirement Income Strategies for Everyday Investors
Investors spend a lifetime building a retirement nest egg. But once they retire—will it last?
Making It Last – Advanced Retirement Income Strategies for Everyday Investors offers key insights for developing a sustainable retirement income strategy for clients.
Pay Attention to Marginal Tax Rates and Not Tax Brackets
The analytic framework for providing retirement income planning advice must use marginal tax rates and not tax brackets.
COVID-19 Strained Participant Financial Wellness - Can Employers Help Them Recover?
With COVID-19 still a top employer concern, protecting workers’ health and well-being naturally comes first. But the pandemic’s impact isn’t limited to only physical and mental health: financial wellness is also ailing. The crisis has exacerbated the problem, but it’s not exactly a sudden occurrence.
Why Risk Tolerance Questionnaires Don’t Work for Determining Retirement Strategies
Using a risk tolerance questionnaire to establish a retirement income strategy is akin to your doctor checking your pulse to measure your cholesterol. There is nothing wrong with checking your pulse, but it is an inappropriate test for the situation. We propose an alternative test – the RISA – to select the best deaccumulation approach.
How to Cope When Everyone Around You Is Quitting: Teresa Ghilarducci
My friend who works in an emergency room as a physician assistant recently told me that she’s ready to collapse.
Prices Remain High. Costco Isn't the Answer: Teresa Ghilarducci
The most recent data on inflation shows prices rose last month by the smallest amount since January, but that doesn't mean consumers are in the clear.
ETF Industry Risks Losing Key Tax Edge as Democrat Whets Knife
Amid the deluge of headlines in the past few days about congressional proposals to boost taxes on companies and the wealthy is one that would affect regular investors -- and potentially alter the entire U.S. fund landscape.
Raise the Debt Ceiling, Republicans. You’ll Be Glad You Did.: Michael R. Strain
It’s unfortunate but true: Influential Republican politicians are playing another round of political chicken that could easily lead to a damaging brush with default on the national debt.
SALT Cap Confounds House Democrats Crafting Taxes for Biden Plan
House Democrats continue to search for a way to satisfy lawmakers who want to scrap the deduction limit on state and local taxes without losing progressives wary of a tax cut that would overwhelmingly benefit the wealthy.