Portfolio Size Effect and Retirement Income Strategies

Does the 4% rule still work? In this episode, we welcome three esteemed experts to counter a recent controversial claim made on the Dave Ramsey Show regarding the validity of the 4% rule in retirement planning. Joining us is David Blanchett; the Managing Director and Head of Retirement Research for PGIM DC Solutions, Michael Finke; a distinguished professor of wealth management at the American College of Financial Services, and Wade Pfau; Director of Retirement Research at McLean Asset Management. In our conversation, these experts shed light on the intricate world of retirement income planning, dispelling misconceptions and advocating for a more nuanced approach. Discover the flaws in Ramsey's assertion and explore the dynamics of sequence of return risk in retirement planning. Unpack the complexities of investing in bonds for retirees and the evolving risk profiles of stocks over varying investment horizons. We also uncover the significance of variable spending rates, debunk the fallacies behind aggressive withdrawal suggestions, a safety-first approach in retirement finance, and much more. Tune in for an enlightening journey through retirement planning and equip yourself with expert insights to pave a secure path for your financial future!

Key Points From This Episode:

• The motivation for addressing Dave Ramsey’s 8% retirement spending rate claim. (0:07:26)
• Unpack the holes in Dave Ramsey’s 8% claim. (0:09:48)
• How important sequence of return risk is for retirement planning. (0:15:08)
• Discover if investing in bonds is risky for a retiree. (0:17:57)
• Learn how the risk of holding stocks changes for longer versus shorter investment horizons. (0:21:55)
• Subjective risk tolerance and how it is influenced by market fluctuations. (0:24:04)
• Going all-in on stocks compared to strategies that involve both bonds and stocks in your investment portfolio. (0:30:10)
• They share their thoughts on Dave Ramsey’s notion that the 4% rule is depressing. (0:35:23)
• Overview of the issues and misconceptions surrounding the 4% rule. (0:37:28)
• Alternative approaches to spending money from a riskier investment portfolio. (0:40:06)
• Dynamic spending strategies to improve the initial withdrawal rate from investments. (0:43:01)
• Explore other financial products, like annuities, for retirement planning. (0:50:05)
• Mindset hurdles and adjusting expectations for financial planning. (0:58:46)
• Dissect the concept of delaying government pensions and its impact on investors. (1:02:24)
• Insights into the pros and cons of delaying social security for higher-earning women. (1:07:52)
• Final words of wisdom the guests have for listeners. (1:09:30)

Links From Today’s Episode:

Michael Finke — http://www.michaelfinke.com/home.html

Michael Finke on X — https://twitter.com/finkeonfinance

Michael Finke on Facebook — https://www.facebook.com/mfinke

The American College of Financial Services — https://www.theamericancollege.edu/

David Blanchett — https://www.davidmblanchett.com/

David Blanchett on X — https://twitter.com/davidmblanchett

David Blanchett on LinkedIn — https://www.linkedin.com/in/david-blanchett-b0b0aa2/

PGIM DC Solutions — https://www.pgim.com/dc-solutions/

Wealth, Managed Podcast — https://www.theamericancollege.edu/knowledge-hub/wealth-managed-podcast

Wade Pfau — https://retirementresearcher.com/wade-pfau/

Wade Pfau on LinkedIn — https://www.linkedin.com/in/wpfau/

Wade Pfau on X — https://twitter.com/WadePfau

McLean Asset Management — https://www.mcleanam.com/

Retire With Style Podcast — https://risaprofile.com/retire-with-style/

Alliance for Lifetime Income — https://www.protectedincome.org/

Episode 89: Wade Pfau: Safety-First: A Sensible Approach to Retirement Income Planning — https://rationalreminder.ca/podcast/89

Episode 137: David Blanchett: Researching Retirement — https://rationalreminder.ca/podcast/137

Episode 254: David Blanchett: Regret Optimized Portfolios and Optimal Retirement Income — https://rationalreminder.ca/podcast/254

The Ramsey Show — https://www.youtube.com/@TheRamseyShowEpisodes

The Ramsey Show: You Can’t Win With Money if You Don’t Know Where Your Money Is — https://www.youtube.com/watch?v=Xg4Z8EQY3Ao

‘Supernerds Unite Against Dave Ramsey’s 8% Safe Withdrawal Rate Guidance’ — https://www.thinkadvisor.com/2023/11/13/supernerds-unite-against-dave-ramseys-8-safe-withdrawal-rate-guidance/

RISA profiler — risaprofile.com/rationalreminder

‘Quasi-empirical bootstrap sampling paper’ —

Jason Fichtner — https://bipartisanpolicy.org/person/jason-j-fichtner/

‘The Value of Delayed Social Security Claiming for Higher-Earning Women’ — https://dx.doi.org/10.2139/ssrn.3849653

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/ 

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://twitter.com/RationalRemind

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.ca Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/ 

Benjamin on X — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Cameron Passmore — https://www.pwlcapital.com/profile/cameron-passmore/

Cameron on X — https://twitter.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/