The Importance of Location in Portfolio Decisions

Today’s extensive conversation with David Blanchett covers nearly all aspects of retirement planning. As the Head of Retirement Research for Morningstar, David has published extensively on the topic and speaks energetically about how you can best manage your retirement wealth. After a brief digression on Kentucky's Bourbon Chase Relay, we open the episode by discussing how an increase in your pre-retirement income can impact your plan. David shares his insights on what your plan should factor in, including earlier than anticipated retirement, inflation, healthcare costs, and whether you should invest in high-risk options to increase your retirement income. While reflecting on why success rate is a poor metric for weighing your strategy, we then chat about David’s view on flexible retirement spending. A controversial subject for some, we dive into the role of annuities and how different annuities cater to varying retirement scenarios. Later, we touch on how human capital affects portfolio allocation and why it’s challenging to evaluate real estate before hearing David’s take on why financial advice is about helping a client accomplish their goals — and not about beating the market. Tune in for an ever-relevant overview of top retirement planning considerations.

Key Points From This Episode:

• Introducing today’s guest, Morningstar Research Head David Blanchett. [0:00:03]
• Swapping experiences of running the Bourbon Chase Relay. [0:02:34]
• How rising pre-retirement income impacts your ability to retire comfortably. [0:04:19]
• Rules of thumb in how you should approach salary increases. [0:05:21]
• Why people end up retiring earlier than they expected to. [0:06:47]
• What percentage of working income retirees should aim to replace. [0:08:06]
• Whether your retirement plan should cover inflation and healthcare costs. [0:08:59]
• Using worst-case scenarios to explain the consequences of risky investing. [0:11:52]
• Why success rate can be a poor metric for retirement planning. [0:13:41]
• Gauging your minimum and maximum levels of retirement comfort. [0:14:50]
• David’s advice on implementing a flexible retirement spending strategy. [0:17:23]
• Exploring the role that annuities play in a retirement portfolio. [0:18:32]
• How the alpha of your portfolio can be equivalent to annuity benefits. [0:20:11]
• Conflicts in how financial advisors help you allocate for your retirement. [0:23:06]
• Further insights into the factors behind whether you should get an annuity. [0:24:47]
• Why pension benefits have a higher value than most are aware of. [0:28:03]
• Why bond ETFs can’t recreate the cash flow stream offered by annuities. [0:30:45]
• Are you a stock or a bond? Revisiting the human capital question. [0:34:10]
• How your profession might impact your portfolio allocation. [0:36:41]
• The difficulty of accounting for the value of real estate. [0:38:11]
• David’s view on how financial advisors can justify their fees. [00:42:09]
• Evidence showing that those with financial planners have healthy finances. [00:47:18]
• Hear how David defines success for himself. [00:51:13]