FM 009: How To Convert Your Volatile Investment Portfolio Into Automatic Income With Wade Pfau

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It baffles the brightest financial minds…

How do you convert a volatile portfolio into a stable, automatic income stream?

After all, your investment portfolio goes up and down like a roller coaster, but your retirement spending requires a reliable income that you will never outlive.

How can you make these two contradictory situations work together?

Traditional financial planning provides an oversimplified answer in the 4% Rule, but the latest research into safe withdrawal rates has revealed surprisingly different conclusions. In fact, there are new solutions that will give you more income when you need it most with less risk of running out of money before you run out of life.

Related: A better investment strategy than buy and hold

In short, there is a clear benefit to advancing your knowledge beyond the old rules-of-thumb.

In this 9th episode of the Financial Mentor podcast, Wade Pfau, Professor of Retirement Income at the American College, brings you up to date on the latest research in retirement income planning. He goes beyond the 4% Rule by revealing a variety of alternative ways to spend your portfolio without putting your financial security at risk.

Even if you are nowhere near retirement you should still listen carefully because this information can have a dramatic impact on how you plan for retirement.

In this episode you will discover:

• The critical differences between the asset accumulation phase of retirement planning and the post-retirement spending phase.
• What the “4% Rule” is, and why it may not be safe.
• The real-world difference between a static and dynamic withdrawal strategy and what it means to your financial security.
• The inherent limitations you must overcome to extract an automatic income stream from a volatile portfolio.
• What the required minimum distribution is, how it works, and why you should care.
• The surprising reason why increased spending in retirement means you were too conservative.
• The best rule-of-thumb model that maximizes both income and safety.
• The advantages of a “spending ceiling” rule and the dangers of a “spending floor” rule.
• The 2 reasons why your success or failure in retirement depends as much on when you retire as how much you retire with.
• The 2 key factors that will determine 80% of your safe withdrawal rate during retirement.
• The one situation where running out of money during retirement is NOT catastrophic.
• How to separate a good annuity from a bad annuity – before it costs you money.
• The single biggest advantage that a SPIA (Single Premium Immediate Annuity) brings to your portfolio.
• Discover the simple business reason why a SPIA can pay you more income than competing investments.
• Uncover how the “income flooring” strategy can reduce risk and increase spendable income.

Resources and Links Mentioned in this Session Include:

• Wade's website is at RetirementResearcher.com.
• The first Financial Mentor podcast episode #1 with Wade Pfau is here.
• My 7 Steps To 7 Figures Wealth Building Course
• Wade's research article comparing SPIA's to self-annuitizing a volatile portfolio.
• My book on Amazon How Much Money Do I Need To Retire?
• Anthony Webb's research paper using IRS required minimum withdrawals as a safe withdrawal rate.
• Jonathan Guyton's research using “guardrails” to govern safe withdrawal rates.
• My book on Safe Withdrawal Rates in Retirement.

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