Even more important than not running out of money in retirement is another goal: not having to make crucial financial decisions as you age.
“You want these to be on autopilot,” says Moshe Milevsky, professor of finance at York University’s Schulich School of Business, in an interview with ThinkAdvisor.
Additionally, he visualizes non-financial experts such as gerontologists, social workers, and psychologists joining RIAs in the retirement conversation to help very affluent clients plan for potential gerontological health issues and other retirement needs. the elderly.
When it comes to reducing or even eliminating financial decisions as you get older, guaranteed income products — aka annuities — fit the bill, Milevsky says.
In fact, annuities “should be a central part of the retirement portfolio.
“Stocks and bonds alone will never get you through the entire life cycle. You should include annuities to supplement them,” argues the annuity expert, a member of the University of Toronto’s graduate faculty in the Department of Mathematics and Statistics.
In the interview, the professor recalls that in his college and early graduate years, the “scientific philosophy” was that retirement income planning was the “nastiest” problem in modern finance, according to one branch. mathematics related to engineering.
But “mathematics will never solve retirement planning.” There’s a lot more to having a “satisfying, healthy and fulfilling retirement than ‘solving it,’” he argues.
Milevsky’s teaching covers wealth management, investments, insurance, pensions and retirement planning. He is also the managing director of the consulting company PiLECo.
He has published 15 books and over 60 peer-reviewed scientific articles, and delivered over 1,000 speeches and seminars.
“Longevity insurance for a biological age(2019) is one of his latest books.
ThinkAdvisor recently had a phone interview with Milevsky, speaking from Toronto, and a follow-up email exchange.
He praises comprehensive financial planning, but warns that with the scale of the critical aspects, it “cannot be done in an elevator”.
Here are the highlights of our interview:
THINKADVISOR: What’s the key to planning for retirement?
MOCHE MILEVSKY: As you age, you should make fewer financial decisions. You want these to be on autopilot. This goal is even more important than not running out of money in retirement.
I am chronologically in my early 50s and really enjoy the investment and portfolio building process. I like optimization. I hope to do all of this in a decade.
But in two decades, at 70, I’m not so sure anymore. At 80, I’m not sure I have the financial or technical acumen to deal with any investment vehicle that will exist at that time.
And at 90, I don’t want to make those decisions.
I can assure you that if I ever turn 95, I no longer intend to log into Vanguard or Fidelity or check P/E ratios or payout rates.
If I’m alive, I’ll be happy with a decent saddle!
So as I get older, I want to make fewer financial decisions. I want to put my finances on autopilot in retirement and live off cash.
What is a good product to use?
This is one of the benefits of annuities. You have just cashed the check. No decision. No asset allocation. No optimization.
I think annuities — nowadays described as guaranteed income products — need to be a central part of the retirement portfolio. This is important in the later decumulation phase, of course.
Even in the accumulation phase, you need to start thinking about how the annuities will be built up, because stocks and bonds alone will never get you through the entire life cycle.
You should include annuities in the retirement income portfolio to complement stocks and bonds.
