Not going to lie, happy to see Wade Pfau here. Dude does not get enough respect due to the bad reputation of annuities but he really gets how they COULD work for SOME retirees. Awesome lineup.
Dave Ramsey is great of getting people out of debt for people who have trouble with credit and debt. But he is so nuts about his stats on returns, withdrawals rates and salary predictions.
As viewers we are so fortunate to have access to this incredible show and in particular this episode and panel. Thank you Benjamin and Cameron for everything you do!
Thank you, TRRP. Brilliant discussion. Graduate level content. Thank you to Wade Pfau for the RISA link. Based on the assessment, I am a total return person now but reconsidering annuities based on the discussion today. I loved Michael's comparison of annuities to Social Security in the US. That might be a good way to frame it for investors.
Epic! Wonderful and deep discussion between 5 giants. This must go viral (well, at least among the math nerds living in their parents’ basements 😂😂😂). Btw: nice to hear a reflection on Cederberg’s recent paper. Thx.
I can't even use a standard algebraic calculator for anything but a very simple calc after using RPN for most of my career. Long live RPN!! I resisted switching for years until my TI-58C died and I had an HP calculator I had been given by a vendor as a prize. Pulled it out, learned it and fell in love with it.
A great lineup of guests, excellent discussion. I’ve shared with my son who chose a target date fund and a friend who worries about her mutual fund choices her advisor recommends.
Great content but surprised that no mention was made of the cost of the risa questionnaire. I assumed from how it was framed in the video that as a one off it would be free to subscribers.
my only issue with annuities is the risk of not keeping up with purchasing power because i am promised currency according to some inflation index that could be abused in the future, global stocks i cant see a way to not keep my slice of the pie of the worlds productive economy
How variable spending works in real life though? This year live like King and next year rice and beans? Should the asset allocation help withdrawal from debt or equity which ever is doing relatively well at the time? But the spending shall stay relatively straight in line with inflation.
Dear Ben, I would like to better understand this topic. I have seen previous videos by Ben mentioning 2.7% withdrawal rate. How can the perpetual withdrawal rate of endowments then be so much higher ? Thank you.
2.7% is an initial withdrawal rate followed by inflation adjustments thereafter. This results in constant inflation adjusted withdrawals. Endowments spending rates are based on spending a % of the portfolio each year, often with a smoothing formula. This means that while the % is stable, the dollar amount will be variable. This is similar to what was discussed in the episode. If you want constant real spending, you need a lower initial spending rate. If you can be flexible, you can spend at a higher initial rate.
At around 34:40 the discussion turns to Sharpe Ratio maximizing portfolios. If an investor is primarily using index funds, shouldn't we be discussing Treynor Ratio maximizing portfolios?
My biggest problem with annuities is who they are sold by. My trust of insurance companies in the US is 0%, and the people selling them are typically slimy.
Love all you guys and your individual and combined efforts to help people understand the complexity of the issues. My question is do these suggestions on spending apply to someone who only has 1.4 million and not 3,5, or 10 million in their accounts, and has a 30 year horizon. It seems that spending more dynamically especially in the current higher inflation, high s&p environments may be ill advised and not realized for 10 to 15 years down the road. Any thoughts on the Karsten Jeske CAPE based strategy to mitigate the high market? Or is that market timing? My favorite for many years is Ben Felix, his no nonsense almost Vulcan-like approach to data and research studies is so refreshing compared to some of the Dave Ramsey and Cramer TV personalities. Keep up the great work guys.
Amazing Content. As a DIY investor, the encouragement that with Dynamic Spending rules (ie Guyton Klinger) plus guaranteed income such as my military pension, you could support likely 5 or 6 percent and ‘be fine’ lifts a big weight. Thank you gentlemen.
The University’s Endowment Spending Policy (“Spending Policy”) attempts to balance the objectives of preserving purchasing power and providing substantial current support by using a long-term target payout rate of 5.25% combined with a smoothing rule that adjusts spending gradually for changes in the market value of Yale’s endowment. The payout under the Spending Policy is equal to 80% of the prior year’s spending plus 20% of the long-term spending rate applied to the previous year’s beginning endowment market value, with the sum adjusted for inflation. The spending amount determined by the Spending Policy formula is adjusted for inflation and taxes and constrained so that the calculated rate is at least 4.0% and not more than 6.5% of the endowment’s fair value as of the start of the prior year.
Wonderful content! I do have a question about retirement income though. As I understand, the 4% rule is to maintain your principle through life. But what about when you die? I don't have any children and want to hopefully draw down my entire portfolio. Would a higher withdrawal mitigate this?
And another question. Was Ramsey saying to take 8% and never adjust for inflation? I'm curious if the results would be similar if Ramsey's withdrawal never adjusts for inflation like the 4% rule does
The 4% rule is not designed to maintain principal. It is designed to minimize the probability of running out of money based on historical data. Higher withdrawals will increase the probability of running out of money, but will also achieve the objective of spending more while you're alive. Flexible withdrawals achieve both goals. They should allow more lifetime spending without increasing the probability of failure. As I understood it, Ramsey was saying 8% including inflation adjustments. -Ben
Experts just don’t get it. Annuities have no inflation protection at all reasonable cost. I don’t want to leave money to the insurance companies and random strangers in the form of mortality credits. I want to leave money to heirs and charities as I choose. 👎
@@ib23579 it may help ease your mind but I probably have an average life expectancy for my age so I really don’t want to subsidize someone else with mortality credits. Now if I knew I would live to 100 it would be a good deal.
Hmm, everyone thinks that everyone else is just like them. They're not. Many people have neither the desire, nor the knowledge and understanding, or even mental capacity to manage investments and drawdown throughout their retirement. Perspectives and circumstances could change considerably between 55 (or any earlier age) and 70 (or later). Also, attitudes to risk vs. the desire for growth vary considerably from person to person.
@@davem.4003You are too rational😂 many people including retirees aiming for optimizing return, but forgot to consider their mental capacity when getting old. Fred Vettese’s book referred to a research paper pointed to people over 70 has increased confidence in managing their retirement finance, but actual ability decreases. Very scary and worrisome stats.
