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Live Long ... and Prosper?
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Letter from the Editor: May 2018

The Vegetables of Financial Planning.

In this issue we’ll talk a lot about longevity and retirement planning.

I’ll tell you a secret—the idea of talking at all about retirement planning, much less at length, makes me a little drowsy.

That’s not the fault of the writers. We’ve got Mark Miller, who I’d argue is one of the best retirement journalists around and a longtime contributor, on why long-term care insurance struggles to gain traction among clients.

John Kador, another longtime contributor, takes a deeper dive into premium retirement calculators than I would’ve thought possible, and by doing so illuminates a central tenet in retirement planning applicable to every advisor: Finding the optimum retirement strategy for an individual client is daunting, even with the best algorithms.

Ed McCarthy looks at how traditional target-date funds, the ingrained default of set-it-and-forget-it retirement planning, fare during periods of “market volatility,” which for retirees translates to “market losses” at exactly the wrong time.

But for me, I think I’m conditioned to think about retirement planning—if I think about it at all—as the vegetables of financial planning. Everyone knows we should be eating more of them, but they’re boring. The markets are more the sizzling steak.

I’m not alone. Go to any financial advisor conference hosted by the custodians or other platforms: Yes, there are education sessions on retirement planning, but not nearly as many as there are on investing and the state of the markets.

There’s tons of energy, research and discussion on portfolio management, all focused on ringing a few extra basis points out of a client’s portfolio via a particular factor tilt, an increased (or decreased) exposure to a certain market or sector, shortened bond duration, etc. And the CNBC talking heads are the rock stars.

But for individual clients, those gains are dwarfed by the possible multi-percentage points benefit that comes from better retirement planning, optimum tax-efficient retirement withdrawal strategies or strategies to mitigate the risks of higher healthcare costs in old age.

Mostly this paradigm exists because the custodial conferences are sponsored by asset management firms, and those are the firms that get the speaking slots. Another issue is pure denial: Retirement, being close to the final exit for our mortal coil, is an uncomfortable thing to think about. A third issue might be the financial incentives. No one gets paid for assets leaving the client’s account.

Another issue is there hasn’t been the kind of innovation around retirement planning, or the client’s “decumulation” phase, as there has been around asset gathering and investing. Is there a “robo” for retirement planning? Is there a user-friendly platform, run on first-class algorithms for navigating long-term healthcare insurance options?

If so, we’d like to hear about them. Drop me a line about this, or anything else on your mind, at [email protected]. Thanks for reading.

David Armstrong


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