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The wealth management industry is changing fast, but many financial advisors are still using the same old playbook. Join hosts Sean Allocca and John Manganaro, along with leading industry expert guests, as they break down the trends shaping your business.
Each week, we'll cover critical topics while also having a little fun. It's all on the table, from retirement income planning and Social Security to the behavioral side of investing and what clients are hearing elsewhere. We've created The Advisor Upside Show because staying informed isn’t enough anymore. You need to stay ahead.
New episodes every Wednesday.
#FinancialAdvisor #WealthManagement #FinancialPlanning
David Blanchett (00:00)
you could tell someone they have an eighty percent chance of success and in their mind they think, there's a twenty percent chance I'm eating cat food when I'm eighty years old. And that's not actually it at all.
Sean Allocca (00:06)
you
Sean Allocca (00:12)
Hello and welcome to another episode of the Advisor Upside Show. My name's Sean. I'm executive editor here at the Daily Upside. And I have with me my colleague John Manganero, who's our senior reporter who covers the retirement beat.
John (00:24)
Yeah, hi everybody. It's great to be here. Loving the podcast so far, Sean. It's it's great energy. another great episode. So excited to be here.
Sean Allocca (00:32)
Yeah, so today we're gonna be talking about retirement, technology, tools, data, all of those things. And financial advisors have never had more of them, right? There's more data, more tech, more planning tools available. So we want to ask the question, why are some clients still struggling with those retirement decisions? And how can advisors help them make better ones?
John (00:53)
Yeah, that's right, Sean. Technology is evolving faster than ever. Retirement is more complicated than ever, as we cover in the retirement upside newsletter. Keep keeps me busy. And clients' expectations have always been changing, but they're higher today than they ever really have been before. So today we're going to look at some gaps in financial planning, especially as it pertains to retirement income, spending in retirement, and long term decision making about how to make the best of one's golden years.
John (01:20)
Joining us this week is David Blanchette, the financial planning expert who heads up retirement research for Prudential, and he's also a portfolio manager for PGEM. guys, bear with me as I tee up this segment. And I think Dave is the the perfect person to walk us through this, given his extensive research into the retirement planning field in general, but also the the real nuts and bolts of of planning. His his his field of research has been very impressive. So
I think we'd all agree that today's financial advisors do a much better job of delivering genuine financial planning to their clients compared to the transaction-focused agents of the past. But as David and I have discussed, there are still a number of important ways that the wealth management industry is falling short of its potential. To be blunt, advisors are in a position to significantly step up their planning game, thanks to the emergence of new technologies and a reconsidered perspective on traditional planning methods.
especially as they pertain to saving and spending in retirement. So in this segment, we're gonna ask David to walk us through seven flaws in modern financial planning. Please let us know in the comments if you've seen any of these in practice, if you're maybe guilty of some of them, you know, don't don't hesitate to fess up. And of course let us know if you've seen any other big ones that we've missed.
John (02:32)
So, David, thanks for letting me introduce that. the first sort of flaw that I'd like you to discuss is an over reliance on probability of success metrics.
Sean Allocca (02:35)
Thank
John (02:41)
I've heard you say in the past that Monte Carlo failures aren't aren't plane crashes, and I think that's a a perfect way to summarize it. But what have you seen here and and you know, how are sort of advisors falling short?
David Blanchett (02:52)
Yeah, so maybe taking a step back, right? I think that that financial plans are really important, right? People need some sense of you know how much they can spend in retirement, how much they have to save. We've got give them like a way to estimate what that is, right? Like how much do you have to save? When can you retire? And so we have to have an outcomes metric. Like like what is defined as good and bad. And so if we go back, you know, maybe a decade or two, you know, what what we used to do in this industry is analysis where we assume that like stocks like your portflow would go up every year by six percent. Like it's just like six percent, like that.
That's just not like that's n that's not realistic, right? Like, you know, in reality, like you're gonna have good years and have bad years. And so I think there's been this movement in the industry towards, you know, running financial plans that incorporates some randomness, and that's called Monte Carlo. It's this idea that, you know, returns can be positive, they can be negative, good and bad things can happen. Okay. And so now though, if you have these kind of like a thousand, you know, trials or fake retirement, there's this question, well, like how do we quantify that that output and summarize those results for the end user?
And I think it's it what's but what's been problematic is is the way that we interpret those results. And so there's actually lots of different ways you could kind of take those thousand runs or trials, you know, each kind of fake retirement with all these random returns and combine them. But what we what the industry is like overwhelmingly moved towards is this idea of the probability of success. And what that is is it looks at each individual run and asks this question, like did you accomplish your goal in its entirety?
Like and if you do you get a one and if you don't you get a zero. And the success rate is the average effectively of all those a thousand or five thousand trials. And so like where that is like just where it's just it's crazy is like if you fall a dollar short in the thirtieth year of retirement, you will have been deemed to have failed. Right? And and no one is gonna be like, yeah, like you know, in that last year I fell a dollar short, so I failed. And so I think the problem is is that is that it doesn't provide the correct context around
Sean Allocca (04:39)
Hmm.
David Blanchett (04:49)
like how on track are you to accomplish your goal. Right? And so I we will people want is some sense of how they're doing. And think that the problem is people don't interpret that number very well. Like you could tell someone they have an eighty percent chance of success and in their mind they think, I I there's a twenty percent chance I'm eating cat food when I'm eighty years old. And that's not actually it at all.
Sean Allocca (05:04)
you
David Blanchett (05:06)
And so I think the the problem is is that is that the metric doesn't define the true outcome, which is like we don't want shortfalls, but there's no sense of like the magnitude of failure. So I'd I'd like to see us move towards like other
definitions that talk about like, you know, like what percentage of your goal do you replace on average or kind of other other approaches that focus more on like how much of the goal do you complete, not just if you don't get all of it, you are deemed to have failed.
John (05:34)
Monte Carlo is a really powerful tool. But David, to your point, I mean, people see a one or two or a five percent chance of the plan failing and and that freaks them out. Whereas that's actually a pretty good position to be in.
David Blanchett (05:43)
It's funny, people like blame Monte Carlo, but like Monte Carlo can do anything. It's not like a this isn't like a a Monte Carlo problem. This is like this is a tools problem. I think that the tools that are widely in use by advisors, you know, in in and for some of these tools, it's like the it's like in giant hundred point font bold lettered underlined. It's like the thing that that that that that advisors want clients to focus on because like it it's mathy, it's it's it's number y like people like, ooh, this is a
Sean Allocca (06:01)
Thank
David Blanchett (06:11)
complex analysis, but I just worry that it leads to underspending because you know people fear this idea of failure when it it's it's not really failure when you think about how things actually happen in retirement.
Sean Allocca (06:22)
you kind of alluded to some of the ways that some better examples of maybe doing using percentile kind of based ways of explaining things, but just from like maybe more of just a human being behavioral, you you see this failure and that's the opposite of what anyone wants to do with their life, especially their retirement. So obviously that's scary. How do you make it a little bit more realistic and show that context of if it's just a dollar, you're not eating ramen noodles every night or cat food, but you you're still going to have a 99%, you know,
happiness of what you would have had. So how do you kind of portray that to clients when you sit and talk with them?
David Blanchett (06:56)
Well, so I think that one, like I think a lot of advisors, a lot of people are captive to their own tools. I don't expect people to go out like me and program things up and figure out calculations. But I think that like at a minimum, like two ways to kind of better conceptualize the outputs if you can do it is one, you know, look at if it's available, like what what is the percentage of the goal that you accomplished on average, right? So right now how it works, it looks at each individual trial and it's a one or a zero.
John (07:03)
Mm-hmm.
David Blanchett (07:23)
Just like average the percentage of your total income that you accomplished and divide that by the goal and then look at that across the runs if that's available. I think a more realistic thing to do is as you mentioned, percentile. So like, you know, answer the question, like in the worst one in ten or one in five or one in four, pick your percentile outcomes, you know, at age ninety-five, at age one hundred, this is what your income is going to be because it it's the income that matters, right? So have some sense of if
You aren't accomplishing your goal, what does that actually look like?
John (07:55)
Yeah. And I've heard, David, I mean, even the term Monte Carlo is pretty confusing to the typical client out there. I mean, they're they're gonna think about a casino somewhere, you know, off the Mediterranean in in Europe maybe think of James Bond. It it doesn't it we we need to break these ideas down and make it just a little bit more human for sure.
David Blanchett (08:12)
advisors aren't gonna change the tools they use, but like don't don't show your client the number. Like I don't know if you show them like like a like a sun or like rainy clouds or like an upset puppy, whatever it pick your pick your picture, but don't give them a number with all they wanna know is am I gonna be okay? And I think like you either effectively say yes or no or th maybe th like there's a maybe, but trying to like you know, I there was a there was a Monte Colour tool that did a hundred thousand runs. You like tell someone they had like a
John (08:22)
huh.
David Blanchett (08:37)
fifty eight point seven five two like that's just it's just meaningless. And so I think that like we need these tools to guide us in terms of what is reasonable, but how we relay that to the average human who's not like a super numerical individual that understands the nuances of this, it it isn't always very useful.
Sean Allocca (08:55)
Hopefully if the advisor does their job right, they can afford that trip to Monte Carlo off the Mediterranean
David Blanchett (09:00)
Yeah, that's right. That's that's that's the end goal,
John (09:00)
Yeah.
David Blanchett (09:01)
right?
John (09:02)
Hopefully, hopefully. so the next sort of shortcoming, and I think this maybe pertains more to the savers and investors themselves, maybe less to financial planners, but it's this real obsession with portfolio returns. And and of course we wanna we want, you know, well priced, high quality investments, but it it's not, you know, that that top one or two percent of the return that makes the difference for long term retirement planning. What would you say, David?
David Blanchett (09:26)
as a portfolio manager I can say this. Like you cannot solve retirement with an efficient portfolio. Right? I think that people like beat themselves to death. Like I'm gonna, you know, you know, build this portfolio and get great returns and like and that is important. I'm not suggesting it's not. But like retirement is is more than just it's much more than just a math problem. Right? I think that you know, like understanding how you structure your your assets against your liabilities, like like like what does the portfolio mean for you?
It doesn't help you to have like a really efficient portfolio, for example, and to have one that you're always worried about and so you can't spend money. So I think that I think in reality there's a lot of a lot of balance at play in terms of figuring out like what is the right way to build a portfolio and how does it help you actually enjoy your retirement versus maximize your returns.
John (10:07)
It just reminds me, Sean, of the coverage we do in the ETF upside and and we're always looking at these, you know, interesting new ETFs. You know, some of them are leveraged, some of them are are, you know, really seeking returns. And and sometimes, you know, that that's very interesting to our readers. But as when I put my retirement hat on and I'm reading about these leveraged ETFs, sometimes I think, are these are these investors kind of missing the point? Sean, does that ever occur to you?
Sean Allocca (10:32)
Well, I mean, I think for the right investor that leverage in those products, the derivative based stuff has, I mean, it's certainly more day traders and people that are very active traders and even right on the prospectus as they say, do not hold this more than 24 hours. You're not going to see it in a guide path anytime soon from in a target day fund. But I think that might be illegal maybe, but.
Yeah, I mean, I think they do have their place for sure. And there's all different products for all different investors. And yeah, probably not something that you're going to see in David's portfolio construction. I don't know, I'll let David weigh in as well on some of those products.
David Blanchett (11:08)
one of the things that I actually did some research on is is FOMO.
regret is the research word, okay. And I think that like make we are all human, we all experience regret. And so, you know, I don't want people to go out and own inefficient or volatile assets, but like if you feel like you have to do that, you know, do it with as little as your portfolio as possible. Like, you know, to your point, like leverage ETFs, like
They do not they're not a long term holding. But like if you're someone that really enjoys, you know, trading the market, you know, like I can't tell someone not to do that if they want to, but what I can tell them is to kind of minimize the impact that could have on their wealth should things not go their way.
Sean Allocca (11:44)
And usually I think when you see it in portfolios, you see it in a small kind of play money. People would say almost a casino money where it's a one, 2%, whatever it is, but something small where you can get out those experiences and urges and animal instincts to go trade the markets, but it's not infecting the core portfolios.
David Blanchett (12:00)
I I don't love the idea of lighting that five percent on fire, but it's better than lighting the entire portfolio on fire, right?
Sean Allocca (12:02)
Yeah.
John (12:05)
kind of move moving right along here.
And I know this is near and dear to your heart, David, but a lot of people, advisors included, have what we'll call unrealistic expectations about retirement spending. And I think that comes in a few flavors, right? Like some people expect to be able to spend too much, perhaps. But I think the real thing is that people expect their spending to be very equal and measured in retirement. It doesn't really look like that in practice.
David Blanchett (12:28)
there's kind of like two different parts to like the retirement equation. There's like your assets, right? That's your portfolio, and that's like capital market assumptions. And I think advisors spend a ton of time like thinking about how do I build efficient portfolios? Is it like 12.2% to a small cap or is like 12.1%? I think a lot of times there isn't the same kind of focus on the goal or the liability, right? So like the retirement goal, the net present value is like the most expensive purchase you're going to make.
And so it's really important to think about like all the assumptions that we that we use in our models. And so, you know, a really common assumption in a financial planning software is that people are gonna increase their spending every year by r in retirement by inflation, no matter what. Doesn't matter what the markets do, no matter what happens. And like in like one, like no one does that, right? Like no one like calls their advisor up and like, hey, CPI was up three percent last year, I'm gonna spend three percent more this year. But also, like it doesn't acknowledge the fact, and I've done research on this and others have too.
The people tend to spend less as they age. So like if you look at the average retiree, they spend about one or two percent less versus inflation. So total spending is increasing in nominal terms, but in today's always it's going down. Right? Another thing that I alluded to as well is just this idea that that like, you know, people react to the markets. And so if we think about like what's going to actually happen in retirement, you know, if you're retired and the market crashes, you're probably gonna pull back on spending.
Right. Well, like in in the vast majority of tools today, Monte Carlo tools, there isn't an assumption that any changes are made. It just seems you just you keep following following this path for the next twenty or thirty years and that doesn't track reality. And so again, you know, it's not really possible to know exactly how someone's gonna r respond to like different market outcomes, but incorporating the fact that you're probably gonna make a change at some point in the future if you have to, can radically affect like how much you can spend today. So again, like this is kind of a tools problem.
I think that we need to have, you know, tools that better reflect how we spend in retirement. But like, you know what what what the net here is though, is that if you incorporate these things into a model, you can spend more earlier in retirement when you're more likely to be able to actually enjoy it because you're healthy.
Sean Allocca (14:36)
I was gonna ask, why do you think that spending goes down in retirement? Is it just the fact that the fear of running out of money? Obviously, I would think that spending, because of long-term care costs and things might increase as you age, but you said that actually it is dipping or how does that work?
David Blanchett (14:50)
So much to unpack here.
you know well Yeah, here we go, here we go. But so I mean okay, high level, it is very true that healthcare spending is a rising share of expenditures as we age. So for the average household age sixty-five, about ten percent goes to healthcare. Okay. fast forward twenty years, age eighty-five, closer to twenty percent. So healthcare is this rising component of spending.
Sean Allocca (14:52)
go down the rabbit hole here.
David Blanchett (15:12)
We all know that healthcare rises faster than inflation. That's like a well-known fact that the but everything else goes down. Like I think like the the most fun model of this is this idea of like the go-go, the slogan, the no-go years. It's just that people actively choose to spend less as they age on average. and you can see this in the data. So, like, yes, a lot of Americans aren't on track to replace their pre-retirement income when they retire. Even if you just focus on just those individuals who have like tons and tons of money.
they still also tend to spend less on average as they age. I think it's just that like, like, like one of it's just because we just can't do stuff, right? As you get older, if you have a health issue, you can't, you can't do the same kind of activities. And so again, like, there's always gonna be that one retiree that spends more of her time because they're healthy, they want to do things. But on average, people just tend to to do less fun stuff, less kind of once types as they get older.
John (16:03)
Yeah. I mean, I think we if we all reflect on some of our, you know, parents, grandparents, we we see that play out. Like I think about my grandparents. They traveled a lot when they were, you know, newly retired, saw the world, and and just very naturally they slowed down over time. And then, you know, my my grandma suffered from dementia. My my grandfather had his health issues and and they really spent a lot of money on that towards the end of their life. It it's just a a n sort of a natural path through the end of life.
John (16:29)
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John (17:07)
kind of related to what we just talked about, but just a broad failure by advisors, I think, by the public to just consider the role of in c guaranteed income, whether that's social security, whether that's the the purchase of an annuity. it's just not really a focus in planning. And and I I know David, that's something you think about quite a lot.
David Blanchett (17:26)
know there's so much literature on the value of guaranteed lifetime income, right? And I mean, you know, to be honest, like the vast majority of Americans already have some guaranteed lifetime income, right? Whether it's gonna be Social Security, some kind of public pension, like most Americans have lifetime income. But I think that the one thing that, you know, I have found is that is that is that people can often use more, right? So like Social Security, I know there's a bit of
A mess these days with the trust fund and all that, but like it's the only thing that you can buy that provides income benefits for life linked to inflation. Right? And that, you know, tax advantage, spousal survival benefits, you like that is incredibly valuable, right? And you know, for most people they say, like, I'm gonna do a breake-even analysis and all this stuff, but like like risk is not like dying when you're 75 years old. If you die when you're 75, like your kids, your spouse, it's all your stuff. Like retirement isn't a risk.
risk in retirement manifests itself if you live to age ninety five, age a hundred, age a hundred and five, where there's where there's this possibility that you are all of a sudden becoming a burden on your loved ones, where you move from like this idea of I'm gonna leave a bequest to actually I'm gonna I'm gonna pull money from my kids to support me being alive. And so I think that we don't often think about like like the true nature of the risk correctly. And I also do wish like we thought, you know, more about guaranteed income as like an asset, like
I I'd love it if like on in every single like like retiree balance sheet there's like a a value estimate of the net present value of Social Security because for a lot of our households it's like a $1 million plus government inflation link bond. So there's really important like portfolio implications about how we think about like risk capacity, risk tolerance, all these different things when you think about guaranteed income more holistically.
John (19:10)
I did catch your presentation, David, at the Horizons conference, you know, with with Michael Finca and some other researchers. It was I I love the the tips you guys gave about using tips to bridge to social security. we we did an we did an article about that for the retirement upside. I I'd suggest people people link to that. I I think this idea of of using liquid assets to delay social security is very powerful.
David Blanchett (19:32)
honestly like I don't have a strong preference about how you fund the bridge. Like you could buy an annuity in if you can invest in stable value, you could put it in cash. to me it's just like there's just not there's nothing else out there that provides the same kind of like economic benefit, value, rate of return, the all these things smash together as delayed claiming. So you know, to the extent someone, you know, one is reasonably healthy and two has the assets to afford to do so, it should definitely be a top consideration.
John (19:57)
Sean, I actually had a quick question for you.
being a financial journalist, I often get questions from my friends and family about things like social security and and there's a ton of worry out there. Do Sean, do folks ask you about what you know, what to do about social security?
Sean Allocca (20:12)
did and then didn't take my advice. So no, not a lot. Yeah, I mean, to David's point, I'm not a huge retirement expert, but I did tell my own parents, like, try and delay claiming because of all the benefits. But even there, some people just want that income then and there. And it makes sense for some people. Some people it doesn't. It's such a personal choice. But yeah, I did try and tell them that. And actually, to the tips point,
I did buy a tips when inflation was like through the roof because they were getting like 9 % or something, whatever it was. And then we wrote that story on tips and I didn't know, but actually it increases the principle too in those. I owned one, I don't even know that. the benefits sometimes, you don't even know all the benefits when you get into it. I just saw the headline of the yield being up like, I think it was like 9%. And you could hold it for like five years or something. then...
Obviously they change over time, but it was super interesting. I didn't even know all of the benefits, there's a lot of tools out there to bridge those gaps.
John (21:10)
That that was fun as we were working on that article, Sean. Cause we were both learn learning together. And I I assume the listeners know, but a tip is Treasury inflation protected securities. It's a type of of government bond that's that was really in vogue several years ago when inflation was sky high. We'll see what happens with the rest of this year and next. We could be having tips conversations all over again. We'll we'll see. okay, so two more shortcomings that I want you to talk about, David. The first one is
treating risk capacity and risk tolerance as the same thing. Can you unpack that for us?
David Blanchett (21:40)
Sure, so risk capacity is how much risk you should take given your situation. So in my previous example, if you have like lots and lots and lots of guaranteed lifetime income, that's kind of like a bond, right? So if you think about how bonds, they pay a coupon, right, you know, for some certain term, you can think of guaranteed income as being a bond. Okay, the more the more guaranteed income you have in your portfolio, okay, as your overall holistic portfolio.
Like the more risk that you could take with your remaining assets, your investable assets. So that that's this that's risk capacity. So risk capacity is like how much risk you should take given like your overall situation. Okay. Risk tolerance is how do you feel about taking risk. You know, some people are are very aggressive, they don't mind if the market goes down th twenty or thirty or forty percent. Other folks just absolutely freak out. I think what's really important is is like when I think about like how to determine the risk of a portfolio.
Risk capacity is is where you should start. Then you should adjust that on the margin based upon your risk tolerance. So for most people, there are exceptions, risk capacity I think should dominate how they invest, not risk tolerance.
Sean Allocca (22:51)
I think again, there's also behavior aspect to the risk questionnaires where you think you're a four risk, but really, you you're not or you're a three or you're two. I mean, everyone hates obviously to lose money. But I think a good way to frame it was an advisor that I talked to was just like, if the market drops 25%, what do you do? Do you sell? Do you panic? Do you buy? And when I thought through that, like obviously you can't sell those holdings just that were inequity that were liquid or now illiquid until the market comes back.
So, you know, that kind of was a lot about my own purse. I thought that I was pretty aggressive, but when I heard that, I thought, all right, maybe I'll pull it back slightly. Obviously, I'm not gonna go and sell those positions. To me, that would be foolish, but would you buy, do the Buffett thing? you know, so it was just an interesting way to think through those. I think they could be a little bit dated, and to David's point, just trying to think through those a little bit more to personalize them to your clients is helpful.
John (23:42)
one hundred percent. we've kind of already talked through this one, so maybe we'll go through it very quickly, but underestimating longevity and and health complexity. But my favorite point here is that, you know, a a lot of folks who who are healthy at age sixty five, you know, they're they're gonna live quite a long time. And and it's very likely that at least one member of that couple will need something like long term care. I mean, it's just a huge, huge planning challenge that we all need to acknowledge. I don't know if you add anything to that, David.
David Blanchett (24:08)
these are very interrelated, right? So if we think about Americans today, you know, Americans that have have like are in the top two deciles of wealth are gonna live three to five years longer than the average American. If you if you're someone that saved a lot for retirement, that's probably you. And so, you know, the longevity statistics that you hear in the media for newborns, those are irrelevant. Even for sixty-five year olds, you know, like you're gonna live longer than average. Well,
One thing we still haven't really solved yet is that the longer that you live in retirement, the the probability of having some kind of like health care shock, you know, long-term care expense just increases almost exponentially. And so, you know, not only are you dealing with this idea that I have to kind of you know potentially you know put aside money to live longer, but the probability and the implications of some kind of you know you know health care long-term care shock.
just increase as retirement increases. And so this is I think this is really difficult because for most folks it it isn't actually an issue. So we look at like like how spending changes in retirement, you know, like for most folks it just tends to keep going down. But you know, one in one in five, one in ten based upon how you cohort it, have these huge end of life shocks. And I think that's gonna become more of an issue over time as we keep seeing these improvements in longevity where wealthier the wealthiest Americans
are gonna live longer but not necessarily better retirements at the latter stages of their lives.
John (25:36)
It's c frankly fairly worrying to look at some of those, you know, trends and and to game out, you know, how challenging it could be. Sean, we were talking this morning about this idea of the great wealth transfer and and I was raising the point that, you know, in my mind, I mean, it's an open question just the huge amount of money that people may need to spend on care and and sustaining their lifespans. some wealth transfer will still happen, but it's it's pretty it's pretty worrying.
Sean Allocca (26:01)
Yeah, that's for sure. I can't wait till the Great Wealth Transfer happens so we can stop, right? You know, we've been talking about it for 15 years. So I'm hoping it's, we have seen some studies where it is actually taking place now and there's a horizontal to the spouse and coming down. So yeah, I mean, no, I think it'll be interesting how that plays out. But I never thought about long-term care and that and how that plays into it. I'm sure some of those, maybe some of those studies did. I'm sure they're much smarter people than me putting those together, but yeah, it's interesting for sure.
John (26:04)
Yeah, I'm
It's coming.
I think I said there were seven at the top. So confusing wealth maximization with retirement success. I mean, money doesn't make you happy in retirement. It's that simple.
David Blanchett (26:35)
you know, like to be fair, the more money you have, the happier you are on average. And so there is there is a a very positive correlation to wealth and things like retirement satisfaction, financial well being, all these different things. But and this is the you know, this is the asterisk, is is you cannot get all the way there if we just focus on wealth. Right? There are other things like like health, social connectivity.
like lifetime income. There's all these other things that that are gonna move the needle more than just wealth when it comes to retirement outcomes. But I think the key is is that like like I think the the problem with our system, huge fan of four hundred one Ks, is that like you accumulate this like this this this pot of money and and and you're trained for thirty or forty years that you shouldn't spend it. Right. You want to see it grow up every single quarter. And now there's this idea that you're supposed to like spin that down.
You know how long you're gonna live and inflation and healthcare and all these things. And so I think what we've created is a focus on on not spending. What we should focus on is like is is creating strategies that really make sure that you kind of maximize your retirement enjoyment. And and those are often two very different things. And so like one of the things that I found in research with Michael Fink at the American College.
Is that like people like they they will not spin down their portfolios. Like the number one rule people use in America today is RMDs. Like the only reason people access their money is because of government tax policy. Okay. In reality, though, if you look at like how people use like lifetime income, they actually spend it. And so I think that you know there's this kind of there's there are obviously these competing forces, but if the goal is to create the the happiest retirement possible, that could very much be at odds with kind of maximizing your wealth.
John (28:16)
Well, David, thank you for stepping us through those. this was this was a great segment. we really appreciate your expertise.
I've already had the opportunity to feature you a few times in the the new retirement upside newsletter, which we launched just a few months ago. If if folks have enjoyed this conversation, please, you know, head across and subscribe to the newsletter. You'll get insights from from David and and the other folks who we've talked about and and many other experts. So encourage you to to check that out.
Sean Allocca (28:41)
mean, we appreciate your time, David. Looking forward to the research. sounds super interesting and I can't wait to do it again with you. Thanks for being on.
Sean Allocca (28:48)
All right, everyone. Well, that's our episode for this week. Thanks for listening. We appreciate it. We want to remind you guys to also check out our newsletters. We have three of them now. We have advisor upside, ETF upside, and also retirement upside, which is what John runs for us here at the Daily Upside. In addition to obviously the Daily Upside, which is our flagship newsletter with about a million subscribers. So plenty of content we come out every week. As we alluded to as well at the top of the show, we have plenty more products coming out.
So you hopefully you won't get sick of us, but we have some new newsletters coming out towards the end of the year. They're going to be monthly and have special topics aligned to them. So look out for that.
We also have a bunch of videos and some other multimedia stuff coming up in addition to our new broadcast. So we're keeping busy. We're having fun. We hope you're enjoying it. And thanks again, John. I'll kick it over to you. So any final thoughts?
John (29:38)
Yeah,
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my information and Sean's information is also available on the website. So if you have a a news tip or want to get involved in any of our newsletters, reach out. We we really want to create a community here and and make this a two way street. So I think with that, Sean, we can close the episode. Hope everybody has a good one.
Sean Allocca (30:18)
Thanks everybody.