For Financial Planners, This Is One The Most Important Stories Of The Year

Saturday, May 19, 2012 13:18
For Financial Planners, This Is One The Most Important Stories Of The Year

Tags: advisor industry people | investing for income | investment strategies | retirement income | retirement planning | social security | stress test

Wade Pfau on Friday explained why the 4% “safe” withdrawal rate being relied on by many of the nation’s top financial planning professionals may not really be so safe for retirees. An understanding of Pfau’s analysis probably should be required of all financial advice professionals.

Pfau’s presentation, which can be viewed by all members of A4A, succinctly reviews the groundbreaking research by William Bengen, a CFP practitioner who in 1994 began publishing on safe withdrawal rates for retirement portfolios and continues to publish on this topic. However, Pfau tweaks Bengen’s assumptions how much retirees are likely to allocate to stocks and examines the issue in the context of the experience of other developed nations to assess the 4% assumption.
The news is sobering; Pfau finds a 3.2% rate to be safe.

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But whether you agree with Pfau’s conclusion is not so important. What is important for financial advice professionals is understanding Pfau’s methodology and reasoning, so that you can come up with your own view of a safe withdrawal for retiree portfolios you are designing.
And that’s what makes Pfau’s presentation so valuable. He is a great teacher. He connects the dots in complicated statistical analysis to make the topic easy to understand.    
Below are comments from 107 attendees who took the time to rate Pfau’s session and gave him an average rating of 4.4 out of 5, which amounted to about half of those who attended, and many other planners will view A4A replay, download the slides and receive CFP and CIMA CE credit for watching it. (Incidentally, while the 4.4 rating is high for any A4A speaker, the fact that Pfau did not get an even higher rating tells you about how demanding and difficult independent advisors are.)
Pfau, who recently joined the Retirement Industry Income Association as director of curriculum for the Retirement Management Analyst designation, is a thought leader whose research in the years ahead is sure to have significant influence on financial planners, insurance agents, CPAs, investment advisors, wealth managers, product manufacturers, and other segments of the financial advice industry. While I was initially skeptical about the confusion that adding yet another professional designation might cause for consumers, the fact that Pfau — an academic with no interest in selling product or protecting the provinces that have long characterized the financial advice business — has associated himself with RIIA has made me a believer.
  • Excellent recap of the history of SWRs addressed from several perspectives, and possible ways to address this issue going forward... Pfau did an outstanding job. Despite reading most of his papers this webinar helped me focus my thoughts on the big picture... Thank you Wade, and please continue your most outstanding work... BTW it was your Twitter feed which brought me here today.
  • This is one of the most valuable webinars, if not the most, I have ever attended. There was too much data for an hour but it was very well done.
  • Sobering reality check on withdrawal rates.I'm depressed now
  • One of your best guests. Thank you.
  • Great !
  • Very good, quite technical. How about tying in a future webinar that will provide some input on how to solve for the scenarios that were discussed.
  • Excellent.
  • Great content.
  • Very important topic.
  • Not too much in that safe withdrawal rates depends on assumed future returns, which are anyone's best guess.
  • No new news. Good education value for income planning
  • Great topic, graphics were well down, Wade Pfau is outstanding.
  • I enjoyed it.
  • This was great well-paced and easy to follow Wade's explanations.
  • Really made me think about shifting to a more conservative withdrawal approach for folks soon to retire.
  • Very timely! Rich data...this was great. Thank you for asking my question about equity-indexed annuities, too. I've been driving myself crazy with this issue all week.
  • Helpful. Good topic.
  • The presentation was purely theoretical , but the data gives professionals data means to construct plans.
  • Excellent
  • Great insights challenging conventional wisdom. Gives me something to think about.
  • Best presentation of the year!
  • I think it was great. Spending policy is key to our business and advising clients. I think it requires researching and reading a number of different studies to have conviction in our advice. Wade's presentation is one of those sources.
  • Please note my question relating to a previous webinar and MPT approaches. This is an extremely complex question, and although this is very helpful, in the real world it is too simplistic.
  • great challenge to a long held belief that 4% was always a safe rate of withdrawal
  • Great
  • Great synopsis of where we've been and why it's probably not adequate. Really like the idea of building the floor. Wish it was cheaper to build a ladder with TIPs! No interest-related investments or products are particularly attractive right now that I know of, including immediate annuities. Best deal is Soc Sec, but will that be pulled out from under us with changes to COLAs, etc.? Fascinating time to be a planner.
  • Makes one think about the proper withdrawal rate for retirees....know a lot depends on client's guaranteed income floors (soc sec, pensions, annuities). It also makes one reconsider what rate is sustainable for clients with a low guaranteed income floor. And, good point in assuming that historical data is relevant to today's economics...i.e., has the US ever had this much debt, the number of people on government subsidy payments (be it soc sec, Medicaid, welfare) in comparison to those that pay taxes).
  • Lots of data to wade through and not sure sufficiently clear conclusions. Was difficult to stay engaged but the subject is so important that it was worth listening closely. Questions and Answers helped clarify his approach. Thank you Andy.
  • Excellent this is the next frontier of financial planning.
  • Incredible number crunching and displayed in an understandable fashion
  • I like this approach on Friday afternoons.
  • This was great
  • Great research, very provocative but right on the point. I couldn’t agree more with Wade Pfau's conclusions.
  • Good information but presentation was a bit weak. Would love to get a copy of the slides to study a little more?
  • Interesting to see Dr. Pfau's model. I'd like to see him explore the final observation he made regarding the Retiree 2000 Vintage and look at where this cohort is now on average, and re-setting the study for a new, 18-year rollout.
  • Content was excellent. Wade needs to speak a little louder as sometimes he is hard to understand. Great content overall. Thank you.
  • Very interesting analysis. Offers a more realistic withdrawal rate for today's world.
  • Very interesting methods for analyzing withdrawal rates. Thanks!
  • Very informative.
  • Really great!
  • This was a terrific presentation; I appreciated the different views and approaches to the data. A little too academic, but excellent data and perspective. The big question is how do I use the info in a practical way?
  • This was a superb webinar. Please do more and thank you!
  • Seemed flimsy rationale. Pfau not fully aware of products (i.e. equity indexed annuities)
  • Great!
  • Excellent and scary I have no idea now what to plan for retirementexcept plan to pray
  • Less Andy, more Wade
  • A good challenge to typical planning advice and sorely needed. One of the best A4A webinars so far.
  • Hit it out of the park!
  • Wade provided much to think about indeed. Impossible to thoroughly cover this topic in an hour but he maximized his use of time well nevertheless.
  • Timely
  • Great background/illumination regarding 4% withdrawal rate. Began to wander a little as we started to discuss why that may no longer be appropriate, but the idea of the floor came through loud and clear.
  • Super
  • Very timely
  • Excellent!
  • GREAT content. Very thought provoking.
  • Repetition by the presenter caused the presentation to progress painfully slowly, but the information was informative.
  • A little complicated.
  • Relevant content, outstanding presenter
  • Very thought provoking.


Comments (2)

How do you download slides? Like many, I hate the fact everything has gone to video on the web, when all you want is a quick recap.
brentb843 , May 22, 2012
A4A members can download the slides at
agluck , May 22, 2012

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