As many of you already know, we have been working hard to figure out the best way to model expected stock returns for financial planning and asset allocation. It has a lot of history in financial literature, which is to be expected, given the importance of the figure. In today’s episode, we’re looking all the way back to 1985, when Rajnish Mehra and Edward C.Prescott called the equity premium a puzzle, through to the present day, when the equity risk premium has only gotten larger. We dive into some of the theories for resolving the equity premium puzzle, explain why US stock market data isn’t the best way to estimate future premiums, thanks to its survivorship bias, and some of the general issues with interpreting past returns. Benjamin also gets into predictability, which is not as obvious as it seems, and highlights some of the information from the simulation he performed, and the big breakthroughs from running the numbers. All this and more in today’s episode on expected stock returns, so make sure to tune in today!   Key Points From This Episode: Kicking off with the fallout from the collapse of Archegos Capital, the death of Bernie Madoff, and the story of the $100 million New Jersey deli. [0:06:35] Reflecting on the recent article, ‘Could Index Funds be ‘Worse Than Marxism’?’. [0:11:05] On to today’s topic: do expected stock returns wear a cape? [0:13:05] Theories for resolving the equity premium puzzle; either the model is wrong or the historical premium was higher than it will be in the future. [0:14:14] Hear John H. Cochrane’s theory from his 1997 paper, ‘Where is the Market Going?’ [0:14:42] Why we can’t use historic US stock market data to approximate future premiums. [0:14:57] Other issues with looking to past returns, like no proof that the equity premium was stationary. [0:15:23] Why time periods characterized by decreasing risk should effectively see decreased discount rates too. [0:16:04] Dimson, Marsh, and Staunton (DMS) on expected stock returns using out of sample data. [0:16:40] Hear some of the equity risk premium stats from their world index versus the US. [0:19:38] How annual returns have been relatively unaffected by global financial crises. [0:21:15] From looking back, to what to expect going forward: the issues with interpreting past returns. [0:22:10] Why, according to DMS, expected returns equal the growth rate in dividends plus the dividend yield. [0:25:26] Hear the actual figures, which reflect the minor contribution of multiple expansion. [0:26:49] What a company is worth if it doesn’t distribute capital to shareholders. [0:29:03] Find out why the expected geometric equity risk premium works out to 3.5 percent. [0:30:13] While the DMS approach is reasonable, it still doesn’t account for whether expected returns are constant through time or if they vary. [0:32:21] Predictable stock returns dictate that changing risk aversion over time measurably affects risk premiums after good and bad events. [0:34:45] Diving into the vast literature on return predictability, including a paper by Goyal and Welch. [0:35:12] Why predictability is not as obvious as it seems, thanks to our sample data. [0:36:15] What we can learn from ‘Long Horizon Predictability’ by Boudoukh, Israel, and Richardson. [0:39:30] R-squared and market timing decisions; why it would need to be higher than it was historically. [0:40:32] Hear about the world index analysis Benjamin performed and what it proves about risk premiums over 30 and 60 year periods. [0:42:31] Bootstrap simulations and why they are criticized; because they ignore mean relationship, you get a much wider distribution of outcomes. [0:44:50] Big breakthroughs from running through these numbers, like noting the upward bias and tighter distribution in long-run historical data. [0:50:34] How to apply this on your own, using the 3.5 percent risk premium in the long run. [0:52:23] Some of the other interesting things we noted during these simulations. [0:53:10] We pull two cards: choosing between a holiday and a pet, and borrowing money with interest. [0:53:56] Bad advice of the week: a free lunch-esque article on investing in private credit. [0:55:53]

From YouTube channels to get-rich playbooks, whole industries are devoted to the subject of building wealth. But few books present a clear and honest view of what it’s like to have a lot of money. Today we welcome author Jennifer Risher onto the show to share her insights on living with wealth. Early in the episode, we explore how Jennifer and her husband ‘hit the lottery twice’ by being given stock options for both Microsoft and Amazon before they went public. Jennifer then shares details about the key premise of her book: people with wealth never talk about their money. Informed by her experience of having sudden wealth, we discuss why gaining wealth doesn’t significantly change people despite it leading to feelings of isolation. After talking about how wealthy people rarely feel that they have enough, we unpack the many benefits that come from talking about your wealth. As Jennifer explains, using examples from her life, communicating your feelings about money is a solution to many relationship issues that arise from having wealth. Linked to this, we dive into how you can raise balanced children whose outlooks aren’t spoiled by affluence. Later, we touch on the role of giving, Jennifer's top advice for newly wealthy people, and how Jennifer views work now that it’s optional for her. We wrap up our conversation by hearing about how the wealthy make a positive impact on society. In this episode, we dispel many myths about being rich. Tune in for more on why we need to be talking about wealth.   Key Points From This Episode: Details about author Jennifer Risher, today’s guest. [0:00:17] Jennifer shares why she wrote her book and the problems that it addresses. [0:02:43] Exploring the question: how much does wealth change you? [0:06:55] What wealth has given to Jennifer and what it hasn’t. [0:09:10] Jennifer describes the feelings that came with suddenly becoming wealthy. [0:10:14] The process informing Jennifer’s decision that she had ‘enough.’ [0:13:41] Hear Jennifer’s advice for couples who have different definitions of ‘enough.’ [0:16:49] How few wealthy people don’t feel that they have sufficient wealth. [0:19:03] The important role that financial advisors play aligning wealth with people’s values. [0:20:13] How Jennifer’s book is opening up the conversation on wealth. [0:23:09] Challenges around raising children in a state of affluence. [0:25:36] Why modelling virtuous behaviour is key in raising balanced children. [0:28:40] What Jennifer learned from speaking to other wealthy couples. [0:30:23] How having wealth can impact your relationships. [0:34:06] Overcoming the taboo of talking about money. [0:38:52] Ways to view work when working is optional for you. [0:42:28] Jennifer unpacks her biggest lessons on giving. [0:44:00] Jennifer shares her advice for newly wealthy people. [0:50:35] What the wealthy can do to improve society. [0:51:59] Hear how Jennifer defines success for herself. [0:53:34]

Today’s episode doesn’t have an external guest, but Benjamin and Cameron provide fascinating information on a vast range of topics. First, the discussion centers around the book that Cameron is currently reading and what it is teaching him about social networks, the ego-driven world of social media, and the benefits of anonymity online. The hosts share some of the findings from a very insightful discussion which took place on their anonymous community board platform around people’s thoughts on the positive and negative impacts of work. Happiness and the factors that cause it are a big theme in today’s show, as is the practice of ‘buying the dip.’ If you aren’t familiar with this term, you should have a decent understanding of what it is and why you shouldn’t do it by the time you finish listening. The hosts also discuss the incident that has been called “the largest financial meltdown since 2008,” who the RR Model Portfolios are aimed at, and some of the ways people react to crises (in terms of their investments.) Tune in for a whirlwind education on some very important topics!   Key Points From This Episode: Benjamin and Cameron share statistics which show how the podcast is growing. [0:02:53] How the hosts find the guests that they interview on the podcast. [0:03:10] Staggering one year stock performance numbers. [0:04:22] Why Cameron is reading The Hidden Psychology of Social Networks, and what he is learning from it. [0:06:56] Community boards and the arguments for and against anonymous online communities. [0:08:02] The “epic meltdown” which makes up the news story for today’s episode. [0:10:17] Where the value of the Rational Reminder Model Portfolios lies, who will benefit from them, and who probably won’t. [0:13:53] Tools which make implementation easy. [0:21:00] Data on individuals participating in 401(k) plans and a discussion around how humans deal with crises. [0:22:12] The conversation around connection, control, competence, context that was sparked by the question of whether the goal of retiring is a good one to have. [0:26:43] Jonathan Haidt’s Happiness Hypothesis; the importance of love and work. [0:29:34] People don’t tend to prioritize time over money to a point where it is detrimental. [0:32:53] What it means to ‘Buy the Dip,’ the reasons that people do it and the problems with engaging in this practice. [0:33:15] The paper that Benjamin has produced on ‘buying the dip’ which will be out by the time you listen to this episode. [0:40:34] Why the ‘buying the dip’ strategy has been particularly costly for Americans, and the contrast between the cases Benjamin looked at in the USA, Australia, Canada and Japan. [0:45:45] What people don’t realize about leverage and how this impacts their decision to ‘buy the dip.’ [0:52:00] The cards created by the University of Chicago Financial Education Initiative. [0:53:53] Cameron asks Benjamin a question from one of the cards; coincidentally it is about happiness. [0:55:00] The qualities that Cameron and Benjamin believe are most important in someone who is starting a business. [0:57:05]

Technology has made our lives easier but it has also fragmented our leisure time, creating a near-universal feeling that we have too much to do and not enough time to do it. Today we speak with Harvard Business School Assistant Professor Ashley Whillans about how our views of money and experience of time poverty impact our sense of well-being. We open our conversation by exploring the idea of time poverty, with Ashley unpacking the many factors that contribute towards feeling time-poor. Diving into the specifics, we talk about how different income groups experience time poverty and how these feelings are influenced by job satisfaction. After looking into differences in how we value time and money, Ashley shares research into how lower-income women benefit as much from being given extra time as they do from being given money. We then discuss the predictors of whether someone will prioritize time or money before chatting about the best practices and tips that will save you time and boost your well-being. Later, we hear Ashley’s insights into why wealth doesn’t lead to happiness and the need to engage in meaningful activities that increase the value of your time. With such radical changes in our work environments, we reflect on how work-from-home often deepens our feelings of time poverty. We wrap our discussion with Ashley by touching on retiring early versus working for longer, why you don’t need wealth to feel consistent happiness, and how you can incorporate time poverty into your financial planning. As Ashley’s research shows, money can be as integral as time in living a happier, more fulfilling life. Tune in to hear more about the connection between time poverty and your well-being. Key Points From This Episode: Introducing today’s guest, Assistant Professor Ashley Whillans. [0:00:02] Ashley unpacks the concept of time poverty. [0:02:24] Exploring the relationship between time poverty and well-being. [0:03:17] Whether financially wealthy people feel less time-poor. [0:06:58] How job satisfaction impacts dissatisfaction and feelings of being time-poor. [0:10:00] The data underpinning why people are so bad at valuing their time. [0:10:59] Why, for lower-income earners, it can be valuable to trade money for time. [0:13:37] What predisposes people to feel more time-poor than others. [0:16:12] The causal link between preferences for money, time, and well-being. [0:21:51] Hear how Ashley designs her studies to get truthful answers. [0:23:22] How you can think of time while boosting your well-being. [0:26:20] Ashley shares her best practices for maximizing your time. [0:28:22] How our mindsets can influence our sense of time poverty. [0:31:08] Time-focussed versus money-focused and why money doesn’t lead to happiness. [0:33:14] Tips in making small changes that increase the value of your time. [0:37:08] How work-from-home has affected our time-poverty. [0:38:28] We hear Ashley’s views on the value of working longer to have a more secure retirement. [0:40:49] Why you don’t need to be wealthy to experience consistent happiness. [0:44:17] Incorporating time poverty into your financial planning. [0:46:06] How Ashley first became interested in time poverty and happiness. [0:47:46] Ashley shares how she defines success in her life. [0:49:47]

While there is no way of knowing what the best portfolio is, empirical data and financial economics have fixed the problems surrounding investing. But if we’ve fixed investing, then what’s the point of financial advisors? Today we dive into this topic and reveal why financial advice is still valuable to the everyday investor. We open the episode by touching on our movies and books for the week, as well as the latest from the financial world. We then explore why, despite their failure at making predictions, experts are so important across many industries. After defining what financial advice is, co-host Benjamin Felix systematically unpacks the value that financial advisors provide as they relate to key areas including goal-setting and quantification; asset allocation; understanding your human capital and insurance needs; selecting the right financial products; and tailoring strategies to tax considerations. Later, Benjamin highlights how financial advisors can help investors overcome their biases while helping them align their investing goals with living a meaningful life. We close the episode with our Talking Sense segment, followed by the bad financial advice of the week. When so much data is available, it’s necessary to revisit the relevancy of financial advisors. Join us to hear why they continue to play such a valuable role in helping people meet their investing goals.   Key Points From This Episode: Cameron shares the birthday message he received from Seinfeld’s ‘Soup Nazi.’ [0:00:35] We discuss community feedback and the documentary The Last Blockbuster. [0:02:53] Details on financial educator Paul Merrimen, our next guest. [0:06:10] Updates on podcast merchandise and shipping times. [0:07:32] Elon Musk and Mark Carney; hear about our books of the week. [0:09:00] We talk about the latest from the financial world. [0:10:14] Introducing today’s planning topic: What is financial advice? [0:18:40] The role of financial planners when index fund investing is so easily available. [0:19:45] Exploring what financial advice is and what it isn’t. [0:23:37] We unpack the link between goal-formation and quantification and sound financial advice. [0:24:35] The challenge of trying to predict what will make us happy in the future. [0:27:07] Happiness, life satisfaction, and goal-setting as it relates to financial advice. [0:29:00] Pricing your goal and avoiding the hedonic trap of never ‘having enough.’ [0:32:00] Asset allocation as key to the value of financial advice. [0:34:02] Quantifying human capital and your insurance needs. [0:37:00] Why knowledge of financial products is the basis of financial advice. [0:37:50] How taxes impact investing strategies. [0:39:05] Why managing wealth and getting financial advice is an iterative process. [0:40:02] How financial advisors help you eliminate biases that affect decision-making. [0:40:40] The many reasons that people seek expert advice. [0:43:28] We summarise the arguments for the value of financial advisors. [0:47:00] Advice on determining a financial advisor’s level of expertise. [0:48:34] Hear our answers to the profound questions posed in our ‘Talking Sense’ section. [0:51:02] Courtesy of TikTok, we share our bad financial advice of the week. [0:53:30]

How do your perceptions of time influence your long-term decision-making and financial well-being? Today we speak with psychologist and UCLA Associate Professor Hal Hershfield to answer this abstract question. We open our conversation with Hal by exploring the concept of well-being. After chatting about the factors that impact financial well-being, Hal unpacks the balancing act that’s required to live in the present while safeguarding your wealth to support your future self. Hal shares exercises that can help you develop a more vivid sense of your future self and we discuss how this can lead to better financial decisions. We then dive into the role that free time plays in determining your well-being, leading into a discussion on how financial advisors can steer their clients towards achieving their idea of well-being. Returning to the notion of your future self, Hal shares insight into the importance of self-compassion, dealing with life and preference changes, and how hitting age milestones lead to periods of personal reflection and financial reevaluation. Later, Hal gives listeners his take on annuities and how retirees perceive them. We wrap up another informative episode by looking into the link between perceived wealth and spending before touching on how Hal views success. Tune in to hear more about Hal’s research and how it can give you a stronger and deeper conception of your financial future.   Key Points From This Episode: Introducing today’s guest, decision-making expert Hal Hershfield. [0:00:03] Exploring the definition of ‘well-being.’ [0:02:28] Ways that Hal measures well-being. [0:03:46] How financial behaviours and psychological factors impact financial well-being. [0:05:17] Hear how your relationship with your future self affects wealth savings. [0:06:52] Hal talks about how we can get closer to our future selves. [0:10:14] Reflecting on exercises that can help you imagine your future self. [0:13:14] We ask Hal when the present and the future begin. [0:17:01] The link between well-being and your perception of your present and future self. [0:20:32] Distinguishing between your present and future self versus having no distinction. [0:22:18] Whether not having little free time is detrimental to life satisfaction. [0:23:51] Hal discusses whether people would rather have more time or more money. [0:28:06] How financial advisors can help people achieve higher well-being. [0:30:59] How changes in your chronological age can trigger moments of reflection. [0:35:48] Differences in how retirees view lump sum and monthly income streams. [0:41:49] Helping people get a clearer idea of the value behind annuities. [0:44:42] How people can develop opposing ideas about when they’ll die. [0:47:33] Hal’s work on the relationship between meaning and spending. [0:49:21] Hear how Hal defines success in his life. [0:52:40]

Where do stock returns actually come from? The answers to this deceptively simple question might change your investing perspective. We dive into this foundational investing topic after sharing community updates and chatting about our books and TV series of the week. A key concept in understanding where returns come from, we unpack how stock returns are impacted when companies migrate across size and value portfolios. While exploring how migration differently affects value and growth stocks, we also break down why book equity and growth drive capital gains for growth portfolios but not for value stocks. Linked to this, we discuss stock convergence as they relate to growth and value stocks. Looking deeper into the stock returns, we assess research on why valuation changes in asset classes are critical in determining expected returns. We touch on how valuations lead to an unfair depiction of international stock performance before asking: how justified are valuation changes to value and growth stocks? From understanding stock returns, we jump into our mini-planning topic on Canadian work from home tax reductions, followed by our Talking Sense segment. We wrap our conversation by sharing some bad financial advice. Join us to hear what it is, and to learn more about the anatomy of stock returns.   Key Points From This Episode: More updates from the community and co-host Benjamin’s battle bot building. [0:00:20] Hear about The Defiant Ones, our TV series of the week. [0:02:50] From The Coaching Habit to Elon Musk, we share our latest book reviews. [0:04:50] Introducing our investing topic: the anatomy of stock returns. [0:10:00] Exploring how changes to a stock type affect value premiums and returns. [0:13:40] Why small stocks tend to have high returns compared with big stocks. [0:17:00] Understanding the value premiums that underpin stock types. [0:18:45] What happens when a stock improves in type. [0:21:32] Factors that lead to price increases in growth and value stocks. [0:25:19] The concept of stock convergence and how convergence impacts value and growth stocks. [0:28:45] Behavioural explanations for the capital gains of value and growth stocks and the role played by stock drift and convergence. [0:32:25] Whether historical returns tell us anything about expected returns. [0:34:15] Why you should always include international stocks when assessing value stock performance. [0:39:18] Using value spread to determine expected value premiums. [0:41:39] We ask the question, “what if the trend in valuation changes to value and growth stocks are justified?” [0:44:17] Diving into our planning topic: Canadian work from home tax deductions. [0:50:12] How renters get a better deal than owners on work from home tax reductions. [0:52:25] Hear our answers to the profound questions posed in our ‘Talking Sense’ section. [0:54:06] Courtesy of Forbes, we share our bad financial advice of the week. [0:57:16]

We’ve previously compared IPOs to lotteries that are prone to inflated valuations and low returns. Today we welcome “Mr. IPO,” Professor Jay Ritter onto the show for a deeper dive into IPO performance, for his insights into SPACs, and to hear his research into why economic growth doesn’t correlate with stock returns. Early in the episode, Jay unpacks how long-term IPO returns perform against first-day trading. While exploring the role that venture capital plays in tech IPOs, Jay talks about why negative earnings don’t affect tech IPOs in the short-term before sharing how skewness factors tend to impact young companies. Reflecting on how IPOs are usually underpriced, Jay discusses how the interests of companies are not aligned with the interests of IPO underwriters. After looking into IPO allocation, Jay compares the 2020 ‘hot IPO market’ with the internet bubble of the late 90s. Later, we ask Jay about what special-purpose acquisition companies (SPACs) are and why they’ve exploded in recent years. His answers highlight their investing benefits, risks, and why SPACs might be a better option for companies than IPOs. We examine how SPACs have historically performed and then jump into our next topic; why economic growth isn’t a good indicator that a country is worth investing in. He touches on why returns don’t correlate with economic growth, the place of capital gains and dividend yields when investing abroad, and how innovations in an industry can lead to higher stock returns. We wrap up our conversation by asking Jay for his take on whether the stock market is efficient before hearing how he defines success in his life. Tune in to hear our incredible and informative talk with Jay Ritter.   Key Points From This Episode: Introducing today’s guest, finance professor Jay Ritter. [0:00:03] How long-run returns of IPOs perform against the first trading day. [0:03:06] Industry differences in IPO returns and how venture capital affects tech IPOs. [0:03:33] Why it’s not always a bad idea to invest in IPOs. [0:05:22] Whether negative earnings for tech companies affect IPO performance. [0:07:32] Exploring the idea of skewness in IPO valuations and returns. [0:08:56] Jay shares advice on investing in IPOs. [0:11:07] Why IPOs tend to be underpriced. [0:12:44] Whether individuals get IPO allocations compared with hedge funds and brokerages. [0:18:00] The factors that lead to ‘hot IPO markets.’ [0:20:53] How technical innovation is linked to an increase in IPOs. [0:23:32] Whether hot IPO markets tell us anything about future expected returns. [0:26:33] Why 2020 was a hot IPO market and how it compares with the late 90s. [0:28:19] The dubious value of individual investors getting exposure in the private market. [0:30:50] Jay unpacks what special purpose acquisition companies (SPACs) are. [0:33:51] How new SPAC prices are rising despite not having acquired an operating company. [0:37:11] Ways that promoters benefit from launching SPACs. [0:38:34] Whether SPACs are a better route for going public than traditional IPOs. [0:42:44] We talk about the risks and historical performance of SPAC investing. [0:44:06] Jay details the upsides and downsides of investing in SPACs. [0:48:02] Insights into which foreign countries have been the best to invest in. [0:50:11] How industry growth can lead to higher returns in that industry. [0:56:30] What Jay uses to work out expected stock returns. [0:59:58] We ask Jay the big question; “Is the stock market efficient?” [01:04:29] Hear how Jay defines success in his life. [01:05:57]

How we model our expected returns hugely impacts our financial decision-making, with poor models leading us to retire either too early or too late. Today’s episode is a deep dive into two topics: how we model expected returns and how fixed income bonds fit into your portfolio allocation. We open the show by talking about the books and news of the week before unpacking the relationship between bond terms, credit, and fixed income returns. We then explore why it’s easier to forecast the expected returns of bonds than stocks, with insights into how this affects your allocation. After reflecting on the predictive power of yield curves and expected capital appreciation and depreciation, we look into how the forward rate can be used to forecast expected term premiums. Touching on conflicting research, we present our conclusions on how you can determine your expected bond returns while also providing a summary of your risk premiums. We round off the topic by assessing alternatives to fixed income investments. From fixed income, we leap into the world of expected return assumptions and how they can best be modelled. We chat about the dangers of operating from poor expected returns models and discuss the successes and drawbacks of the most commonly used ones. While establishing the predictability underpinning average returns, we explain the limits on using historical returns to forecast expected returns. Later, we open up about PWL Capital’s approach to measuring expected returns. We close off another informative episode by sharing this week’s bad advice and answering left-field questions in our ‘Talking Sense’ segment. Tune in to hear more about the role of fixed income bonds and returns models in your portfolio.   Key Points From This Episode: We touch on future guest Jennifer Risher’s book, We Need to Talk. [0:05:34] Hear about the new Bitcoin ETFs and other cryptocurrency news. [0:08:30] Introducing today’s investment topic; fixed income products. [0:12:45] Approaches to building fixed income portfolios and forecasting expected returns. [0:15:31] Exploring the factors that impact fixed income risks and returns. [0:20:50] Using forward rates to predict your fixed income returns. [0:22:31] Conflicting research on the power of forward rates to predict term premiums. [0:24:52] Why forward rates do contain information about expected term premiums. [0:27:51] What Barclays’ intermediate indexes say about fixed income allocation. [0:31:49] The summarised formulas for expected bond returns. [0:34:03] Evidence on why credit spreads have low explanatory power for default rates. [0:35:07] The main takeaways on how we should view bonds and returns. [0:38:20] Comparing fixed income with cap-weighted indexing. [0:40:27] Why Dimensional Funds looks at credit spreads and yield curves around the world. [0:42:20] Introducing today’s planning topic: expected return assumptions. [0:44:55] How important expected returns models are to financial decision-making. [0:45:55] Different models that are used to derive expected returns. [0:47:20] Planning for short-term versus long-term predictability. [0:50:08] The danger of using historical returns as the basis for your expected returns. [0:53:20] Damodaran’s research on how different forecasting models perform. [0:53:48] Insights into PWL Capital’s expected return models. [0:55:07] We answer questions in our ‘Talking Sense’ segment. [0:59:26] This week’s bad advice; incorporate Bitcoin into your retirement investments. [01:01:36]

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]