WCI #454: The Numbers and Psychology of Retirement Spending with Christine Benz

Summary

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Podcast Summary

White Coat Investor Podcast #454: The Numbers and Psychology of Retirement Spending with Christine Benz

Release Date: January 15, 2026
Host: Dr. Jim Dahle
Guest: Christine Benz, Director of Personal Finance and Retirement Planning at Morningstar

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Overview

This episode dives deep into the data and psychology behind retirement spending, blending the hard numbers of safe withdrawal strategies with the softer, behavioral challenges many retirees face when shifting from accumulation to decumulation. Dr. Dahle and Christine Benz discuss recent Morningstar research, practical withdrawal strategies, the critical risks facing retirees, and how medical professionals can approach generating retirement income. The conversation is rich with actionable advice, memorable anecdotes, and data-driven insights for those planning retirement or helping others do so.

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Main Discussion Points & Insights

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1. Christine Benz & Her Motivation

• Christine’s background at Morningstar and her extensive involvement with the Bogleheads and financial education.
• Her motivation stems from Jack Bogle’s influence and the personal fulfillment she finds in simplifying and spreading solid financial principles.
• [06:37] Christine shares:

  “I remember sitting in a room listening to [Jack Bogle’s] booming baritone and thinking, whatever side this guy is on, that's what I want to do with my career.” (06:37)

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2. What is Morningstar and How Can Investors Use It?

• Morningstar offers both free and premium content, including fund ratings, portfolio analysis tools (like the X-Ray tool), and educational articles.
• The X-Ray tool is one of Christine’s favorites for “peering into your portfolio and giving you an asset allocation… It’s a super helpful tool.” (11:12)

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3. Women in Financial Planning & Notable Leaders

• The financial planning space skews male, but Christine highlights several women making important contributions:
  • Laura Carstensen (aging and longevity),
  • Carolyn McClanahan (physician/financial planner),
  • Mary Beth Franklin (Social Security expert),
  • Jackie Cummings Koski (FIRE, “Fire for Dummies”),
  • SC Gutierrez and Valerie Rivera targeting hourly planning and first-gen wealth.
• Christine:

  “That’s one thing I love about your conference, Jim, is that it is more gender diverse than most conferences I attend…” (12:44)

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4. The Hardest Problem in Financial Planning: Decumulation & Retirement Spending

• Christine’s book, How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement, draws on expert interviews and covers far more than withdrawal rates.
• She emphasizes how retirement planning is plagued by uncertainties: lifespan, retirement date, market conditions, and inflation.
• [16:04]

  “The whole thing about how much you can safely spend in retirement... is the hardest problem in all of financial planning.” (16:04)

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5. What Bogleheads Get Wrong

• Both optimization obsession and tax minimization can get in the way of life enjoyment and practical planning.
• Christine:

  “Bogleheads, some of them, not all of them, do tend to head down the optimizer rabbit hole maybe a little more than they should… Perhaps they're neglecting some more important aspects of their financial lives and their nonfinancial lives.” (20:32)

• Dr. Dahle adds that “People need to spend more money… It gets harder to turn money into happiness every decade of life as you go along.” (23:15)

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6. Morningstar’s State of Retirement Income 2025

Research Team & Approach

• Multi-year research project with Amy Arnott, Jason Kephart, and Tao Guo, using forward-looking capital markets expectations rather than just historical data.
• The base case safe withdrawal rate reflects conservative assumptions: a fixed real withdrawal over 30 years with a 90% success rate.

Safe Withdrawal Rates (SWR)

• This year’s base case SWR: 3.9%.
  • Christine:

    “If someone is taking out 3.9% on a million dollar portfolio at the beginning of 2026, they're getting their $39,000 and can inflation adjust that dollar amount thereafter.” (26:18)

• SWR changes yearly due to updated forecasts for stock/bond returns and inflation, not just adding more historical data.
• The most “conservative” model supports 30–50% equities as an optimal starting point due to sequence-of-return risk—not the higher equity allocations commonly recommended.
  • This counters recent advice to “start high and increase equity allocation as you age.”
  • Christine:

    “Given where fixed income yields are today, I can get a lot of what you're looking for in fixed income… you can lock up a lot of your return needs in fixed income assets.” (32:00)

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7. Four Major Risks to Retirement Sustainability

1. Poor Market Returns Early in Retirement ("sequence of returns" risk)
2. High Inflation Early in Retirement
3. A Long Retirement Period (e.g., FIRE, forced early retirement)
4. Late-Life Long-Term Care Costs

• Adjusting withdrawals (spending less) in response to these risks—especially poor early returns—is critical.
• Home equity is an under-discussed source to help fund long-term care, but Christine stresses that long-term care risk is most acute for married couples:

  “You have to impoverish the well spouse in order to qualify the spouse who needs care for Medicaid provided long-term care.” (40:31)

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8. Flexible Spending Strategies (Guardrails & More)

• Flexible systems can allow for higher starting withdrawal rates (up to 5.7%) for retirees willing to adjust spending based on portfolio performance.
• Guardrails (Guyton-Klinger), fixed percentage withdrawals, and “endowment-style” spending (spending a % of a trailing 10-year average) are explored.
• The tradeoff: higher initial withdrawals require a real willingness to cut spending if/when markets tumble.
  • Christine:

    “Wealthier people certainly are [able], because a bigger share of their spending is probably coming from discretionary items...” (44:33)

• Enhancing non-portfolio income sources (Social Security, pensions, rentals, part-time work) makes flexible portfolio spending easier.

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9. Social Security Claiming Decisions—Mathematics vs. Psychology

• Financial math usually favors delaying Social Security to 70 (particularly for the higher earner).
• David Bach argues for an earlier start (age 62) based on behavioral finance: people spend Social Security money more willingly than assets from portfolios.
• Christine acknowledges the behavioral reality:

  “For whatever reason, Social Security acts like your paycheck… people have such a hard time diving into their portfolio and spending.” (47:41)

• But for most, especially with “tighter” plans, she recommends delaying filing to maximize inflation-protected lifelong income.

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10. The Place of TIPS Ladders and Annuities

• TIPS (Treasury Inflation-Protected Securities) Ladders
  • Useful for “locking in” spending and hedging inflation risk.
  • Christine warns the TIPS ladder is rigid, complex, and not well-suited for entire portfolios:

    “I do think that as we age, it’s just a wise strategy… to try to reduce the number of moving parts.” (54:25)

  • Target date and all-in-one funds may be more practical for most.
• SPIAs (Single Premium Immediate Annuities)
  • Useful to “cover the gap” between fixed expenses and Social Security, but imperfect (lack of true inflation protection).
  • Rates are better now, and SPIAs are less susceptible to adverse sales practices.
  • Christine:

    “It’s not perfect… you can’t buy one that’s linked to CPI… But for bridging that gap, a small SPIA purchase can make sense, especially if you’ve maximized Social Security.” (56:08)

• Best "annuity":
  • “The best deal on an annuity is delaying your Social Security to 70, 100%.” (61:01)

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11. Retirement Spending Trajectory & Behavioral Insights

• Real retiree spending typically declines after the early "go-go" years (mid-70s and later), even for affluent households.
• Christine:

  “Don’t feel badly if you need to spend a little bit more in your first couple of years of retirement, and especially if the market’s good—give yourself permission to spend when your health is good... You may not always feel that way.” (61:15)

• This “slow-go” trend holds for affluent households, with some nuance (e.g., those in better health might defer the slow-go years).

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Notable Quotes & Memorable Moments

• “Too focused on optimization… Perhaps they're neglecting some more important aspects of their financial lives and nonfinancial lives.” — Christine Benz [20:32]
• “People need to spend more money… It gets harder to turn money into happiness every decade of life as you go along.” — Dr. Jim Dahle [23:15]
• “Given where fixed income yields are today, I can get a lot of what you're looking for in fixed income assets… you can lock up a lot of your return needs in fixed income.” — Christine Benz [32:00]
• “Flexible strategies prompt you to recalibrate how much you can spend each year based on… your portfolio. Some methods let you take more as you age…” — Christine Benz [41:55]
• "The best deal on an annuity is delaying your Social Security to seventy, a hundred percent." — Dr. Jim Dahle [61:01]
• “Don’t feel badly if you need to spend a little bit more in your first couple of years of retirement… you may not always feel that way.” — Christine Benz [61:15]

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Key Timestamps for Important Segments

• Christine’s role & Morningstar intro: [02:38]–[08:36]
• Women in financial education: [12:04]–[15:26]
• Retirement planning as the hardest problem: [16:04]
• Bogleheads’ common mistakes: [20:32]
• The State of Retirement Income research: [24:47]
• Safe withdrawal rate explanation: [26:18]
• Why the optimal equity allocation is lower: [32:00]
• Retirement risks & spending adjustments: [34:04]–[41:20]
• Flexible withdrawal strategies: [41:55]
• Social Security timing debate: [46:13]–[50:18]
• TIPS ladders/funds versus complexity: [50:44]–[55:48]
• Annuitization & when SPIAs fit: [56:08]–[59:40]
• Retirement spending trajectory: [61:15]

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Takeaways for White Coat Investors & High Earners

• Safe withdrawal rates are nuanced, and your path will likely blend numbers, psychology, and personal circumstance.
• Prioritize spending money to maximize happiness—not just optimizing portfolio metrics or minimizing taxes.
• Non-portfolio income (Social Security, annuities, rentals) is a stabilizing force for retirees—maximize this where possible.
• Flexible spending models can support higher withdrawals but require real behavioral flexibility.
• Age and portfolio simplicity go hand-in-hand; reduce moving parts as you enter the decumulation phase.
• It’s normal for spending to decline (“slow-go years”), so give yourself permission to enjoy your early retirement.

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For further reading, refer to "The State of Retirement Income 2025" on Morningstar and Christine Benz’s book, “How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement.”

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Transcript

[A]

This is the White Coat Investor Podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011.

[B]

This is White Coat Investor Podcast 454The State of Retirement Income with Christine Benz brought to you by Laura Road For Doctors Laura Road is committed to serving the financial needs of doctors, including helping you get the home of your dreams. Laurel Rhodes Physician Mortgage is a home loan exclusively for physicians and dentists featuring up to 100% financing on loans of a million dollars or less. These loans have fewer restrictions than conventional mortgages and recognize the lenders trust in medical professionals, creditworthiness and earning potential. For terms and conditions, please visit www.l LaurelRoad.com WCI that's www.l LaurelRoad.com wci Laurel Road is a brand of KeyBank NA and an equal housing lender. NMLS number 399797. Welcome back to the podcast. Hope you're having a great new year. We're recording this actually in December, the very beginning of December, so it's going to be like six weeks between the time I record it and when you hear this. But there's nothing that's super timely we're discussing here, I hope, unless the entire stock market just crashes this month or something. But if it seems like we haven't addressed something that's in the current news, that might be why our quote of the day today comes from Warren Buffett who said chains of habit are too light to be felt until they are too heavy to be broken. Love truth to that. All right, everybody out there, it's a new year, new you. I hope you're working toward your financial goals this year as well as accomplishing those other important things in life that we all have to do. Thank you for the difficult work you do. I I did a presentation this morning to a bunch of emergency medicine residents and I think back to the beginning of my career and how exciting everything was and realized how many people I have sat with and been with on the worst days of their lives. And many of you have had that opportunity as well. And it's a noble work. Thank you for doing it out there. All right, we've got Christine Benz today. It's a long interview. I think we chatted for close to an hour, so I'm not going to spend a lot of time talking before we bring her on. If you don't know and love Christine, hopefully after today you will. She's wonderful and let's get her on the line here. Our guest today on the White Coat Investor Podcast is Christine Benz. Christine, welcome back to the podcast, Jim.

[C]

It's always great to talk to you. Thanks for having me on.

[B]

It is great to talk to you. For those of you who do not know Christine, she's the director of personal finance and retirement planning for Morningstar. She's a senior columnist there. She hosts a podcast for Morningstar called the Longview. She has published a number of books, been in the New York Times, Wall Street Journal, Barron, cnbc, pbs, you name it. She's been named on the inaugural list, the 100 Most Influential Women in Finance. She's on that list in 2020 and 2021. She's been named by Barrons as one of the 10 most influential women in wealth management. And she's a good friend and also does a lot of, I don't know if charity's the right word to call it, but a lot of volunteer work with the Bogleheads organization where you're also the, you know, the president essentially, of the Bogle Center. So thanks for all you do, Christine, and thanks for making time to be with us on the podcast.

[C]

Thanks for all you do, Jim. You make a wonderful contribution to the community of financial educators. So thanks for all that you and the team do.

[B]

Yeah. For those who are not aware, Christine is also going to be one of our keynote speakers at wcicon, the Physician Wellness and Financial Literacy Conference in Las Vegas in March. Now, I think we titled your conference contribution there the Number and Psychology of Retirement Spending. That's mostly what we're going to talk about today. But what should people look forward to? What's the elevator pitch for coming and hearing that talk?

[C]

Sure. So I will share some research that our team has been working on. We're now in our fifth year of doing research on safe withdrawal rates. And the research we do is a little bit different than the famous Bill Bangin research that relied on historical data to help people determine how much they can reasonably take out of their portfolios in retirement. We take a forward looking view. We embed some views around equity returns, fixed income returns, inflation on a forward looking basis in an effort to help people look forward as they think about their retirement spending. Another topic I'll be discussing in the presentation is how difficult it can be to turn on retirement spending once you are actually retired. This is not something, something I know personally, I've been employed and I'm still employed, but I know that this is something I'm going to struggle with When I do retire, when my husband and I retire. Because seeing your portfolio grow is something that you can kind of get hooked on, and you never want to see that number go down. You sort of anchor on your high watermark, whatever it is. And so the psychology around retirement spending is real. It's a problem for some older adults, and especially more affluent older adults, adults, to actually spend in line with what they could spend. And I think part of the problem might just be the term spending. People maybe associate it with profligacy that we're telling them they need to spend when they don't feel like spending. So there's a lot to unpack there in the realm of giving yourself permission to spend after your lifetime of working really hard.

[B]

Yeah, I find my work transitioning more and more toward that. So we're going to talk a little bit more about that today as well. You know, Christine, you have dedicated an extensive amount of time, and I'm not sure most people involved in this even recognize how much time it is having run conferences ourselves, Katie and I definitely recognize how much work it is to the Bogle Center. Tell us a little bit about your motivation to do that. Why are you dedicating so much time and effort to essentially as a volunteer to the Bogleheads?

[C]

Right. So the Bogle center is named after John C. Bogle, who was the founder of the Vanguard Group of Funds. And I date my interest in the Bogle center and Bogleheads back to Jack's appearances in our Morningstar offices when I was an analyst just kind of coming up. And I remember sitting in a room listening to his booming baritone and thinking, whatever side this guy is on, that's what I want to do with my career. That's how I want to move my career. I want to be on that side of things. And so the Bogle center is focused on providing financial education. We do these conferences. We put all the conference sessions on video so that people can consume them on YouTube. We have chapters throughout the US that people can join to hear speakers, to share information about their own financial plans. And we support the bogleheads.org forum as well. So the Bogle center is involved in a lot of different aspects of financial education, but for me, it's just super aligned with the work that I do at Morningstar, where we, in a lot of ways, are financial educators at Morningstar. And so I find that there are a lot of synergies. And one thing I love about planning the conference, Jim, is that a I get to work with you and Katie on it and you are wonderful contributors to the conference, but also being able to leverage some of the contacts that I've made through the podcast that I work on. I feel like we've really upped our game with the Bogleheads conference because of some of the great speakers that we've brought on board. And there's sort of just a benevolent effect where once someone comes to this conference as a speaker, I think they're sort of an ambassador for the Bogleheads. So it's been a really nice way to build our Bogle center network.

[B]

Yeah, pretty awesome. Now your paid work is at Morningstar. Morningstar's been around for a long time. It actually precedes the Bogleheads forum. I mean, the initial Bogleheads forum was at Morningstar. Some resources at Morningstar, a lot of resources at Morningstar are totally free. Some of them are paid. Can you kind of give a brief overview of what Morningstar does and how investors should be using those resources and, and what paid ones they might want to consider?

[C]

Sure. So there are a lot of different tentacles of Morningstar today. When I joined, we were largely an organization focusing on rating mutual funds, analyzing mutual funds. That was the group that I grew up in within Morningstar for individual investors. And I'm guessing most of your audience would be individual investor types. The main product we have for them is morningstar.com which is where there is a free part of the site. Most of the information on Morningstar.com is free. So all of my articles and videos, all of really anyone's articles and videos would be part of the free site. There are some portfolio management tools that are also part of the free site. Lots of data and analytics. Kind of the line in the sand in terms of what is paywalled would be any of our analyst content. So we have a terrific group of individual equity researchers as well as fund and ETF exchange traded fund researchers. Any of their written analyst reports, whether on actively managed funds or the big total market index funds, any of their written reports would be part of the paid part of Morningstar.com, the premium part of the site. So for people who want to do their due diligence on their holdings, maybe on sort of a one one time basis or on an ongoing basis, the premium part of the site can be money well spent for them.

[B]

You know, when I use Morningstar most frequently, what I do is I Google a ticker and Morningstar is what I'm doing. And it just gives me information about the fund, you know, what it holds and what the fees on it are and those sorts of things. That's about where I go to look up funds, because it's a little bit of a pain to go to every individual, you know, fund company's website and dig through the different formats. I know how the information is going to be laid out at Morningstar for every fund, and so that's how I end up using it most frequently. One of the tools I think a lot of people used in the past was the Morningstar X ray tool that's now behind the paywall, right?

[C]

I believe it is, Jim. So for people who have portfolios saved on Morningstar, the virtue of that X ray tool is that it, it kind of peers into your portfolio and takes whatever holdings are in the portfolio and gives you an asset allocation for the underlying holdings so you can see a view of what's actually in your portfolio. So it's a super helpful tool. It's always been one of my favorite tools for looking at my own portfolio or if I'm helping anyone with their portfolio, to really understand, well, what are the sector biases that might be built into the portfolio? What does the style box positioning look like? What does the asset class positioning look like? It's a super helpful tool in that context.

[B]

Now, Christine Behrens has named you as one of the 10 most influential women in wealth management. And when I go to or look at pictures from or whatever, you know, typical financial conferences, it's like going to the men's locker room. There are not very many women in this field, and I'm sure it's improving, but it looks the most, you know, the most male heavy field in medicine is orthopedics and financial services. Makes that look downright egalitarian by comparison. Tell us about some of the women we should be paying attention to in investing, wealth management, personal finance, et cetera, that maybe aren't on our radar now.

[C]

Yeah, I will say that's one thing I love about your conference, Jim, is that it is more gender diverse than most conferences that I attend and more people of different ethnicities as well. So kudos to you for bringing aboard a diverse community of doctors to attend your conference.

[B]

Part of that's just medicine, though, Christine. Right. I mean, the admissions committees all did that 15 years ago for me.

[C]

Well, whatever it is, I love to see it. So, in terms of women who I respect in this field, there's a long list. Several of them were in my book, the thought leaders who I leaned on for the interviews in my book. But a short list would include Laura Carstensen, who runs the Stanford center on Longevity. One of my favorite speakers on any topic is Laura, and her main focus is aging and how we can age well, which is of interest for all of us. Carolyn McClanahan is another person who I love. She is an MD but also a financial planner and is very on demand on the speaker circuit. She's a bit of a brand, I think, in the best possible way. She's not afraid to call out entrenched interests. Mary Beth Franklin is largely retired now, but I think a terrific thought leader in the realm of getting what you have coming to you in Social Security benefits. And then I have a long list of up and coming folks, women who I really admire. Jackie Cummings Koski has become part of our Bogleheads community. Jackie is a leading light in the fire world, the financial independence, retire early world. And in fact she wrote the book Fire for Dummies. She's just a wonderful kind of open book sort of person who talks about her journey to financial independence. SC Gutierrez is someone who I've met through your community, Jim, through your introduction. She's a financial planner who is focused on hourly financial planning, very index fund centric. She's another person who I love to introduce people to. Valerie Rivera is a financial planner in the Chicago area who works with what she calls first gen investors. So people who have come into some wealth who have had great professional careers but are not from money. And so dealing with all of the dynamics and the emotions around being the first person in your family to make money is a focus of Valerie and her practice. So that's just a short list of people who I really love, of women whose work I really love and admire.

[B]

Yeah, awesome. Definitely check those people out. I think I've met most of them at another and they're wonderful. I agree. Okay, so if you want to meet Christine, shake her hand, thank her for all the work she's done. Come see us in Las Vegas in March. The other thing you get when you come there, I'm pretty sure I'll have to double check with Katie, but I think we're giving away a copy of your book how to Retire to Everybody who attends 20 lessons for a happy, successful and wealthy retirement. So Christine, what motivated you to write this book? I mean, are you thinking about retiring or how'd you get so focused on all this retirement stuff?

[C]

I realized that all of the retirement planning research, it's just the richest vein in the world of financial planning. And I call the whole thing about how much you can safely spend in retirement. The hardest problem in all of financial planning, because you're planning for this unknowable time horizon. You don't know how long you'll live. You might not even know when you'll actually retire. You don't know what market conditions will prevail over your retirement. So there's just a lot to dig into. And the more I dug into retirement planning, the more I realized it's not just a financial issue. Obviously there are so many different non financial questions to delve into as well. So where you live in retirement, what sort of health care you're seeking, and how to make sure that you're getting the best possible health care, how you maintain social connections once you step away from work. So there are just a lot of different dimensions to retirement planning. And I am a big believer in just lifelong learning. I want that to be part of what I do and who I am. And so focusing on retirement planning has been a way to just keep on learning. So each of the 20 chapters in the book is a discussion with a thought leader about his or her specialty area. So again, it covers the financial issues like how to asset, allocate a portfolio for retirement and how much to safely spend. But it also delves into a lot of the non financial issues that I just mentioned.

[B]

You've been very busy lately. You were also, I believe, listed as one of the editors on this best of Jonathan Clements book lately. I mean, somehow this book came to press within weeks of Jonathan's untimely death. Tell us a little bit about that project.

[C]

So that book was the brainchild of Bill Bernstein, Alan Roth, Jason Zweig, all friends of Jonathan's. And we wanted to do something to honor Jonathan's tremendous legacy. Jonathan was a Wall Street Journal columnist for, gosh, at least 15 years. And he was so influential to me and how I wanted to think about the investment space. And so we had initially proposed coming up with some sort of journalism award and Jonathan felt that that was too self aggrandizing. He wasn't interested in anything like that. But he did allow us to pursue this book project, which is a compendium of his Wall Street Journal columns. Bill Bernstein did a lot of the heavy lifting in terms of cur. Curating the columns. He had Jonathan's help as well. And then I just went through as sort of an editor offering some feedback on some of the chapters Jason and Alan did as well. And they also wrote some supplemental material for the book. And I think it came together beautifully. It has sold really well. I think people have an appetite for the straight, straightforward, empathetic sort of writing. That was Jonathan's stock in trade. So I feel like it's a wonderful way to honor him. And all of the proceeds from the book do go to benefit this charity that we have stood up under the John C. Bogle center umbrella. So it's a nice way to get a download of Jonathan's best columns while also benefiting the Jonathan Clements Getting Going on Savings Initiative.

[B]

Let's make sure we put a link to not only the initiative, but the book into the show. Notes Megan and All right, that's pretty awesome. Jonathan's an incredible person and it's really a great way to honor him. So thank you for doing that. Now, this is a podcast and everybody likes entertainment on a podcast. And the best way to get entertainment is to have controversy. And so we're going to get into some of that about retirement topics. But before we do that, I want to ask you a question that got asked to me and other panelists on a panel at the Bogleheads Conference this fall, which is what are one or two things you think Bogleheads frequently get wrong?

[C]

So top of my list, Jim, would be they are too focused on optimization. I think this has been a drum that I've been beating recently. There's this, this research that's been done in the realm of how we human beings shake out in terms of our personality. So on one side would be the optimizer sort of person who's going to finely tune everything in their lives. Financial matters really lend themselves well to this whole optimization mindset where you think, okay, I'm going to put 3% in small value and I'll have 16% in large growth and you're really going to tightly calibrate everything. And on the other side would be sort of what's called a satisficer personality, a person who's willing to say, you know what, this is good enough. I'm going to buy three total market indexes, US International and Bond. I'll allocate in what seems like a reasonable way given my life stage. And then I'm just going to kind of of walk away and say, enough is enough. And so I think that Bogleheads, some of them, not all of them, do tend to head down the optimizer rabbit hole maybe a little more than they should. And the net effect of that is that perhaps they're neglecting some more important aspects of their financial lives and their non financial lives. So to me, that's the biggest kind of Blind spot for a lot of Bogleheads. I remember it was probably four years ago, five years ago at a Bogleheads conference. I think you were there. Jim and Michelle Singletary spoke about how to help people in your life financially and how to decide, like, how much is reasonable to give to other people. How to put some guardrails around, how much you're giving away to people who you love. And we were laughing, we were crying. She's a wonderful spouse speaker. I think she's been a speaker at your conference before. And I hopped off the stage and someone came up and said, christine, I just have to ask, how much should I put in small cap value? I thought he was kidding.

[B]

They missed the whole point. The whole point of the conversation?

[C]

Yeah, the whole point of the conversation was much more than about your style box allocations. And so I think that is a risk for some Bogleheads. They get too into the minutiae and they lose the forest a little bit because they're so focused on some of these small bore aspects of their financial lives.

[B]

Yeah, for sure. When I was asked that question, I mentioned two things. One is people need to spend more money. They just got to realize this is kind of the lesson from Die with Zero is it gets harder to turn money into happiness every decade of life as you go along. So you got to find a balance between taking care of few future you and current you. But lots of people are getting that wrong and having a real hard time spending money. And the other one I said was, you know, and I saw it again, I think yesterday on the Bogleheads forum. I commented to somebody about it. Their goal was to reduce their RMDs. And I'm like, that should not be the end. All goal, right, to pay the least amount in taxes that you can. The best way to reduce this is to lose all the money in your tax deferred retirement accounts. Then you don't have to pay any rmd. But sometimes people just get so focused on stiffing the tax man that they're stiffing themselves along the way, which I think is pretty unfortunate when you see that happening.

[C]

Those are wonderful points.

[B]

Yeah. What I really wanted to focus on today is this paper that you sent over to me. It's actually under embargo as we record this. It's not yet published, but it should be by the time this podcast drops. And I'm sure you'll tell me if something happens and keeps it from publishing before then put this podcast off. But I wanted to spend some time today going over it it's called the State of retirement income 2025 and I want to go over it in some of its key findings. But before we do, tell us who was involved in the paper and why we should listen to them.

[C]

Sure. So this is a paper that I work on with my colleague Amy Arnott who is part of our small portfolio and planning team at Morningstar. Jason kept part from our manager research group is also part of the team. Jason does great work on some of the multi type investment products like target date funds. And Tao Guo is our quantitative researcher on the paper. We could not do it without Tao, so he runs all of the simulations. He's really creative about helping us look at the data in different ways. He's a cfp, so he really gets the substance of the work which having someone with quant experience and that CFP background is invaluable. So that is our team. We also work with Jeff Batak, who is our boss on our small research team and he offers valuable feedback about different types of research that we might do. So it's a wonderful team of co researchers who are coming back at this topic every year.

[B]

Now one of the interesting things about this paper, and essentially you've been updating this paper every year for the last five years or so, is that each year it comes up with a base case safe withdrawal rate that changes every year. It's ranged everywhere in the last five years from 3.3% to 4.0%. The current version says it's 3.9%. Tell us what you mean by a base case safe withdrawal rate.

[C]

Right. So this is meant to be a forward looking view. If you're retiring say in January of 2026, this is meant to be some guidance around how much you could reasonably take out. And that base case is super important to discuss Jim, because it's quite conservative in terms of the spending system that it embeds. So we're assuming that someone is looking for kind of a fixed paycheck in retirement that you would take out this same real amount, so the same inflation adjusted amount throughout your retirement. The problem is that's not really how people spend, which we can discuss, but that's kind of the baseline system that we assume. So if someone is taking out 3.9% on a million dollar portfolio at the beginning of 2026, they're getting their 39,000 and then they can inflation adjust that dollar amount thereafter. So it's assuming a static spending system throughout a 30 year time horizon. And we're also assuming that that individual wants a 90% Prof. Probability of success, so they want a 90% probability of having at least a dollar left over at the end of that 30 year period. In many of the simulations that we do with that base case, there's much more than a dollar left over. But that's sort of the minimum standard to pass as a safe withdrawal rate system.

[B]

Now, why is it changing year to year? Are you basing that off valuations of mostly off bond yields, or is it, you know, you're adding one more year of historical data to the data set or why is it changing?

[C]

Right, so it is a forward looking view. We turn to a team within Morningstar that does capital markets assumptions. So they do essentially forecasts for stock returns, bond returns, inflation, and we extrapolate that over a 30 year period. So their forecast, it's a 10 year forecast that they do. But then we add on kind of a normalized version for the next 20 years and we use those forecasts to underpin the starting safe withdrawal rate. So these things ebb and flow a little bit. You referenced that 3.3%, which was the low ebb for the safe withdrawal rates. That was back at the end of 2021 when fixed income yields were really low, equity valuations were high, and inflation was flaring up. So kind of a perfect storm for new retirees. And so that was flashing a yellow light saying, okay, if you are about to retire, be prepared to tap on the brakes a little bit here. And of course, the way 2022 played out, we didn't know specifically how it might play out, but we had rising bond yields that clobbered bond prices. We had falling equity prices in response to higher interest rates. We had very high inflation. When I look back on that, that seems like it was a pretty good call to tell people, okay, if you are just starting out in retirement, be prepared to rein it in a little bit in terms of your spending so it will ebb and flow. Based on those forward looking views for what we think equity returns might be fixed income returns as well as inflation.

[B]

But the idea isn't that people will change their withdrawal rate each year based on these projections. It's that if this is the year you're retiring, that's our best guess of what the safe withdrawal rate is for your next 30 years.

[C]

Exactly. We aren't suggesting that people change up their withdrawals substantially based on this research. If you're already retired, continue on whatever path you're on, because people would be terrified at the end of each year if they knew that. Okay. Morningstar is saying that we really need to rein it in. It just is not a comfortable withdrawal plan for most retirees. I wouldn't think we're going to talk.

[B]

About comfortable plans here, but I think we ought to start, as all good podcasts do, diving into the most controversial thing we can find in there. This is what I found interesting in the paper, and I'll quote from the initial summary. It says the highest starting safe withdrawal percentage per 30 year time horizon comes from portfolios that hold between 30 and 50% in equities and the remainder in bonds and cash. More equity heavy portfolios generally don't support the highest starting safe withdrawal rates because of their higher levels of volatility and associated sequence of return risk. 30 to 50%. That's way less than lots of people have been recommending for the last few years, especially my parents who retired years ago. I put them into a 5050 portfolio, which we've maintained since that time. And so I think classically lots of people had these kind of lower equity percentages in their portfolios. But what I've been hearing the last five years is not only start high, but raise it as you go through retirement to keep up with inflation, to keep up with longevity risk. So what's your response to that criticism that 30 to 50% just isn't enough for longevity and inflation risk? And besides, stocks have the highest long term returns anyway, right? That's what everybody says these days.

[C]

Right. And Jim, I remember when we first did this research, we came up with that conclusion that our highest safe withdrawal rate when we first did this back in late 2021 also corresponded with a fairly light equity weight. And I remember telling our researchers, go back, do it again. That can't possibly be right. But then when we dug into it and thought about it, it's a function of that very sort of robotic spending system that we're assuming is our base case. So we're assuming that someone wants to set their starting withdrawal percentage and then effectively put blinders on and never look at what their portfolio value is, is never take a bit less in a poor market, never take a bit more in a better market. And so if that is someone's goal, where they just want to take the same real amount out of their portfolio year after year. The Monte Carlo simulations that we run to help arrive at this starting safe withdrawal percentage basically says, given where fixed income yields are today, I can get a lot of what you're looking for in fixed income today. If we lock that down, given that Yields are in the neighborhood of, you know, 4%, even maybe a little bit over 4% in some cases that you can lock up a lot of your return needs in fixed income assets. But it is a function of that very conservative spending system that we use as our base case. I would not recommend that anyone use such a spending system. In fact, most of the flexible spending systems where you are paying a little bit of attention to your age as well as your portfolio value, they're just better. They allow you to take more from your portfolio during your lifetime. And that's what most people should be going for. They shouldn't be settling for the very low number attached to our base case, in my view.

[B]

Yeah, and we'll get into those flexible spending systems, but before we get there. So let's talk for a minute about the four risk factors that the paper really identifies. And what's the risk we're talking about? We're talking about the risk of running out of money before you run out of time. That's the risk we're talking about. And the paper mentions four of those two of which I would lump into sequence of returns risk. Well, maybe not, but the first one is poor market returns at the beginning of retirement. You retire and you have five years that are just the worst returns we've seen in 50 years and really decimates your portfolio while you're taking, making withdrawals from it. The second one being high inflation early in retirement. The third one being a long retirement. You know, the typical fire person that ends up with a 40 or 50 year retirement necessitating them to take withdrawals over a longer time frame. And then lastly, really high long term care costs at the end of life. Can you talk a little bit about these risk factors and how people ought to be thinking about them and, and doing about them other than just spending less because these risks exist.

[C]

Yeah. Amy and I both worked on this section this year. Amy looked at the sequence of return risk questions. So if bad market returns show up early in your retirement and you don't take steps to constrain your spending during those periods, that leads to a higher probability of running out at the end of the time horizon. On the other hand, if you've made it through, say the first 15 years or 20 years of retirement and then that really bad market environment shows up, it's much less impactful. You've kind of made it through the difficult period, even if you make it through the first decade without really bad losses. So the key point there is if you have the misfortune of retiring into a really bad market environment. If, say, the first five years of your retirement are poor in terms of market returns and your portfolio returns, you need to take steps to address that with your spending. And unfortunately, from a practical standpoint, those are the years when a lot of people have pent up demand to have a lot of fun.

[B]

They're the go go years when it matters the most.

[C]

Exactly. But a best practice in that situation is to try to address the poor market returns with lower spending. And the reason is pretty intuitive, which is that if you're spending less from your portfolio during that time when it's dwindled, it leaves more in place to repair itself and recover when the market eventually does. So that was the first risk factor. The second one, which I think the past several years have accentuated, is this sequence of inflation risk. That if high inflation shows up early in your retirement, that can be just as big a problem as if bad market returns show up. And the reason is that prices will tend to stay elevated. That even though inflation may abate, the inflation rate may abate. We're probably stuck with the hotel prices that we have today. I hate to say it, but food prices probably aren't going meaningfully lower from here. Housing prices may have some bobble in the future. But the fact is you're building off of a higher level of spending from the guests go if that higher inflation shows up early on in your retirement. So here again, whatever steps you can take to address that high inflation, if you can spend a little bit less, all for the better for the longevity of your plan. And then the second two risk factors that I focused on were early retirement. It could be a fire type person retiring with a portfolio that has grown really well. So a person retiring in her 50th 50s or maybe early 60s or a more sort of traditional aged retirement who is knocked out of the workforce maybe at age 62 or something like that. If that is the case, if you've got a longer time horizon, a best practice is to try to reduce spending from sort of those baseline levels that we talk about in the paper. So taking a bit less, I think, I think assuming a 40 year time horizon took the base case spending rate down to like 3.6, 3.7%. And then the final risk factor relates to long term care. If someone has effectively a balloon payment at the end of his or her life, where you have much higher spending to address long term care costs, how does that affect lifetime spending up until that time when you have those very high pay costs. And so the negative there is that spending would need to be curtailed across the whole time horizon if you hadn't set aside a plan for long term care in some other fashion. Ideally, I think you would address that either by buying long term care insurance or setting aside some kind of a long term care fund and kind of segregating that from your spendable assets versus factoring that into your lifetime spending plan.

[B]

Although toward the end, at least for single people, you know, spending down, you get to those high expenses at the end. What's your money for if not to take care of you in your life? And eventually you may end up with, you know, a Medicaid funded long term care at the very end. Once you've spent down to those levels, certainly the big risk there is leaving your spouse impoverished. I think this is a much bigger issue for a married couple where the first spouse to get sick can just decimate their portfolio with long term care costs. I think that's probably the biggest risk there. I suspect most of those people who have burned through a multimillion dollar portfolio in long term care costs probably don't have a whole lot of life left, much less quality of life left and may not mind quite as much that they're in the facility being paid for by Medicaid.

[C]

No, absolutely true. And there are lots of practical dimensions to the long term care problem. Home equity I think has been an under discussed element of funding long term care that most retirees do own their homes. And if they can tap that home equity in some fashion, either by selling the home or by going into some kind of reverse mortgage to fund long term care, that can be an attractive lever as well. But you're so right about the Medicaid qualifications that there are some really negative implications for married couples where you effectively have to impoverish the well spouse in order to qualify the spouse who needs care for Medicaid provided long term care.

[B]

Yeah. Okay. Well, you mentioned you're a big fan of these flexible, flexible approaches to retirement withdrawals. I am as well. In your paper you tested four additional flexible spending methods this year and you said two of them actually increased your starting safe withdrawal rate as high as 5.7%. Now that's good news for people who want to retire now, but maybe don't have enough to retire on 4%. Should they maybe consider retiring when they can retire on 5.7% now and follow one of these plans?

[C]

I think so, Jim. And the idea, as I mentioned before, is that the flexible strategies prompt you to recalibrate how much you can spend each year based on how your portfolio has performed. And some of the methods will also let you take a little bit more as you age, because quite intuitively, as your time horizon shrinks, you should be able to take a little bit more from the portfolio. So we examined a number of different popular strategies for recalibrating withdrawal rates. I continue to be a fan of the guardrail system that was initially developed by Jonathan Guyton and William Klinger. But Amy looked at a couple of additional strategies this year that even boosted the starting safe withdrawal percentage. Beyond that, one was a really simple system of taking the same percentage out of the portfolio year after year. So that'll buffet you around a little bit because of course your portfolio's value is going to ebb and flow. But that was one of the ones associated with nearly 6% starting safe withdrawal rate over a 30 year horizon with a 90% probability of success. The other one was one that Charlie Ellis raised to us in a conversation that we had about his great little book, and I'm blanking on what it's called, but it's a really nice efficient book about how to invest reasonably well. And he raised the point that someone could use kind of an endowment method where they're taking like a 10 year average of their portfolio's value and letting that drive how much they could take out each year. That was another method that was associated with a fairly high starting safe withdrawal percentage. So for people who have tighter plans or who really want to live in a up during their lifetimes, they absolutely should investigate some of these dynamic spending systems, but also understand the trade offs that are associated with them.

[B]

You know, the criticism of these flexible methods is that you have to be really flexible with how much you spend. You got to be okay with significantly cutting your spending in order to increase your spending to these sorts of of 5.76% whatever levels, you've got to be willing to take a major pay cut if that sequence of returns risk actually shows up in your life. Do you think most people are able, willing, interested in doing that?

[C]

Well, wealthier people certainly are because a bigger share of their spending is probably coming from discretionary items like travel, going out to dinner, whatever else kind of falls into that non discretionary bucket. It's just easier for them. For someone, if you've done the run the numbers on your household spending and a lot of it is more or less fixed, then you'd obviously have less leeway to adjust. An important dimension of this, Jim, is that most of us in fact, I would guess almost all of us are not just bringing our portfolios into retirement, that we have some non portfolio cash flows that we'll be able to rely on in retirement. So for many of us it'll be Social Security. For a smaller share, it'll be a pension. People might have rental income from rental properties that they own. Maybe you're working a little bit in retirement. Having that non portfolio income and boosting that share of non portfolio income in terms of your household cash flows makes the portfolio spending adjustments that much more package palatable. So we do examine the combination of portfolio income and non portfolio cash flows and we find that those two things work really well. That if you can take a flexible approach to spending from your portfolio, but also line up as much as you can from those non portfolio sources of income, that's a really nice stabilizer for your household cash flow flows.

[B]

Speaking of Social Security, the recommendation in the paper, as usual, for most personal finance authorities is to wait until 70, at least for the higher earner, even if it means spending other assets in the meantime. Now I heard an interesting counter to this. It was from a podcast, Money for the Rest of Us. They had David Bach on. David Bach is the author of the Automatic Million and a great guy, and hopefully we'll be having him on the White Coat Investor podcast soon. But he argued, at least for those who don't really need Social Security to take it at 62. And the essence of his argument was a behavioral argument. He said people have the hardest time in the world spending their money. But for whatever reason, Social Security acts like your paycheck, it acts like your income. It's easier for people to spend. And of course if you take it to 62, that's your 60s or your go go years when you want to spend more anyway. And he says go ahead and take it. I'm taking mine at 62 because I'm going to start spending it or giving it or whatever. I'm going to use it now because people have such a hard time diving into their portfolio and spending portfolio assets and withdrawing money from retirement accounts, whether they're tax deferred or Roth accounts. What do you think about that behavioral argument argument against waiting until 70, which clearly is the financially optimal thing in most cases, right?

[C]

The math definitely argues for waiting if you possibly can. I'm part of a blended couple where we have probably with same age, equal earnings history. We plan to have one of us take probably at our full retirement age 67, and the other wait until 70 doesn't really matter who does that. It'll work out to be the same either way. But I think the math does not favor that answer. But behaviorally, he's onto something in that income isn't income isn't income. That we do have a little bit of mental accounting going on, for better or for worse, that we give ourselves more permission to spend certain types of income. So Social Security income tends to be one of those really comfortable types of income to spend for whatever reason. Maybe it seems like an abstraction that it's not really your money. And it's not really your money, actually, although it is once it starts flowing to you. But Social Security annuity income, there's been some research done on this topic that people who buy an annuity just tend to be more comfortable spending that paycheck that comes in the door. Dividend income versus total return spending is another source of income that people tend to just, for whatever reason, feel like it's more mad money than it is taking a chunk out of my portfolio, something that is appreciated in terms of its value, that doesn't feel great. Whereas getting a dividend check sent to my house and spending, that seems more natural. So there is some mental accounting that goes on. People may, especially if they have very flush plans, like it's sounding like David was referencing, maybe, maybe take that and run with it if there's really no wrong answer in terms of you running out. But for people with tighter plans, I would advise probably hanging on and delaying filing as long as you possibly can. Because I think of 2022 as kind of a perfect reference point for why you should try to enlarge Social Security. So we had bad equity returns, bad bond returns, high inflation. The Social Security recipient was insulated. The cash flows from Social Security were insulated from those forces, and you got that really nice inflation adjustment. So if you delay, you're inflation adjusting an even larger number. So I still think that there are a lot of reasons for people to consider delaying.

[B]

Yeah. Now, Morningstar in this paper, like Bill Bernstein, who we just had on the podcast a few weeks ago, loves the idea of a TIPS ladder. People love TIPS ladders. Those who get into this stuff and are optimizers and are really detail oriented, they love this idea of a TIPS ladder. Explain to us why and what you think about the additional complexity and who's it really worth building a TIPS ladder for?

[C]

Right. So a TIPS ladder is the idea of assembling a basket of treasury inflation protected securities. So these, these are securities issued by the US Government and they have A really nice feature that most bonds don't have, which is that you receive an inflation adjustment in your principal value that reflects whatever is going on with the current inflation rate. So the idea with this TIPS ladder is that you're assembling a basket of TIPS with each bond maturing in each year of your retirement. So you're essentially spending that TIPS bond and you're getting the inflation protection. And so it's a beautiful way to meet your household living expenses while also addressing the big risk of inflation. And I think one of Bill's major attractions to this whole TIPS ladder idea is that he views inflation as one of the key wild card risks for retirees and to TIPS ladder would nicely defend against that risk. So we look at using a TIPS ladder in the context of retirement spending. And right now, actually, given where TIPS yields are, it actually beats our safe starting withdrawal percentage. If you just buy this TIPS ladder, if you assemble, would Yield a roughly 4 and a half, half percent starting withdrawal percentage, which is better than that 3.9% starting safe withdrawal rate that I was talking about. But the downsides are that it's rigid. So once you set down this path, there's really no looking back. It's very hard to undo the TIPS ladder. And then the other big, big caveat is that your money isn't going to grow as long as it's in this TIPS ladder. And when you spend through it, it's gone. So if you live 35 years, well, if your whole portfolio was in this TIPS ladder, then there's nothing left over to support you. So it's rigid, it's inflexible. I could see people using it for part of their retirement spending, but I don't think any of us would recommend that someone take all of their assets and park it in a TIPS ladder. I think most people would want more flexibility and want the possibility of some Portfol.

[B]

Yeah, for sure. It can't be all the portfolio, no doubt about that. But the other issue with it is something Katie and I ran into recently. You know, I started building the TIPS ladder a few years ago, buying some five and ten year TIPS and buying these individual securities. I was doing it at Treasury Direct, although you can do this at a Vanguard or Fidelity brokerage or whatever as well. But at a certain point, point we've kind of swung from the optimizer side to the satisficer side. And I talked to Katie. I'm like, what do you think about having, you know, 30 individual, you know, TIPS allocations sitting in the brokerage. And she's like, why are we making our lives complicated? The alternative, of course, is just stick it into a TIPS fund or a tip CTF from Vanguard or Schwab or iShares or whatever. Do you think it's worth the additional complexity for most people to go ahead and build a formal TIPS ladder for that portion of their, you know, definite spending, fixed spending, whatever you want to call it. Do you think it's worth it or do you think it's too much complexity? And behaviorally most people end up screwing it up anyway?

[C]

Realistically, I'm more in your camp that I think it probably is too much complexity for individual investors. Advisors might well build them for their clients. But another consideration, Jim, that's top of mind for me is cognitive decline. That we know that older adults can run into some cognitive diminishment as they age. And having more moving parts to manage in their portfolios just adds more potential for trouble, if you ask me. So I do think that as we age, it's just a wise strategy, especially if you're a DIY type person where you aren't working with an advisor to try to reduce the number of moving parts. Try to reduce the number of decisions that you have to make. Gravitate to total market index funds all in one funds like target date funds or the retirement income version of target date funds. They may not be optimal, but they can really reduce the number of moving parts in your portfolio and the number of decisions that you'll make in the future. And also the number of it'll reduce the number of things that you could potentially goof up if you lose some cognitive ability or if you just forget or decide that you have other things you want to do with your time.

[B]

Yeah, speaking of leaning more toward the satisficer side and the behavioral finance side, Morningstar in this paper still likes Spias single premium immediate annuities, even though you really can't buy inflation adjusted ones anymore. Tell us what you think their place in a portfolio is is now, right.

[C]

So I see the major advantage of some type of an annuity product like that in the context of if you've looked at your Social Security and tried to make a smart decision there, whatever it is for your household, and then you still have fixed living expenses that you want to try to address. And to me, that is the best use of an annuity where maybe my my Social Security is providing 40,000 of my household's fixed outlays and I still have another 10,000 that I want to try to Address in terms of some kind of an allocation to a very safe vehicle like an annuity. I think it can make sense to do a fairly small annuity buy to help shore up that source of income to help align my household spending with those non portfolio sources of cash flow. So I think that that is an effective use of an annuity. It's not perfect in that as you said, an annuity you can't buy one that is tied to the cpi. Unlike Social Security, which is tied to cpi. An annuity you can buy an inflation rider, but you can't buy one that's linked to cpi. So that's a drawback back. And then the annuity is only going to be as good as the insurance company backing it. And so you want to be sure that you are putting your money with an insurance company with a really strong financial strength rating. So you want to do your homework on that front. The good news is that the annuity rates are up a bit along with rising interest rates. And also the SPIA space, the single premium immediate annuities space is a really unsexy part of the insurance industry. So the bad actors tend to not want to be there because it's not very lucrative for them for consumers. There's a lot of transparency there in terms of payouts. It's just not a great money maker for insurance companies. So there aren't a lot of bells and whistles, there's not a lot of complexity and there's not a lot of opportunity for an insurance company to embed unwanted fees in the proposition for you. So that's one reason why I would gravitate to that very vanilla type of product because there's a lot of transparency for the consumer and I think there's, you know, just a lot less opportunity for monkey business on the insurance company's part.

[B]

Yeah, of course you still got to buy it from an agent who's probably going to try to sell you some more bells and whistles. A product with more bells and whistles.

[C]

When you go to potentially so. And yeah, that, that is a potential drawback I would say. If anyone is considering any type of an annuity product, get some objective advice. And even if you have to pay that hourly planner for a small piece of his or her time, to me, getting some quarter backing on that decision making can be money well spent. So don't cheap out and go strictly the DIY right route. I would get a second opinion on that decision because it is a one and done decision. It's not something you can readily Undo, or would want to undo if you needed to. So I would get some financial planning guidance from someone who doesn't have a vested interest in you buying that particular annuity product.

[B]

You know, an unsung benefit of buying an annuity like that is that studies show that annuity owners live longer. I don't know if they just want to live longer and stick it to the insurance company or what, but that is what the data shows. And maybe there's a little bit of garbage in, garbage out from that. Maybe people who are likely to live longer are more likely to buy annuities, but that is an association they've seen with annuity buyers is they live longer on average.

[C]

There's probably some adverse selection in there for insurance companies where the people who, if you're looking back on your family tree and seeing that you had a lot of 90 year old olds running around, you're more likely to be attracted to a product that's going to protect you against longevity risk. So I would guess that insurance companies have looked at that issue and have addressed payouts accordingly, that they know that people buying annuities are more likely to exceed the average life expectancy.

[B]

Yeah, for sure. And if you were considering buying a speed, you should be aware that the best deal on an annuity out there is delaying your Social Security to seventy, a hundred percent. That is the best deal because the insurance companies are pricing these annuities for people that are going to live a long time, whereas Social Security is just for the average person because pretty much everybody gets it.

[C]

That's a beautiful point.

[B]

It is the best deal, definitely the.

[C]

Best annuity you can buy by far.

[B]

Well, Christine, our time is short. What have we not talked about? The white coat investors ought to know about retirement income.

[C]

So a key dimension, Jim, is the trajectory of retirement spending. You referenced the go go years. The early years tend to be the high spending years. When we look at the data on retirement spending, we do see that spending on an inflation adjusted basis basis does not trend up throughout the retirement time horizon. That people tend to spend less as they move into their mid-70s and into their 80s. And some people do have that balloon payment of long term care expenses later in life. But people should take that to heart when they think about their retirement spending. That should give them a little bit more comfort spending early on. Because even when we look at affluent households who have the wherewithal to keep spending at a higher level, you know, maybe they were spending right after they retired, they just choose not to. Their travel might be a Little closer to home, they're slowing down a little bit. Maybe they have some health issues that are coming into play. So don't feel badly if you need to spend a little bit more in your first couple of years of retirement, and especially if the market's good, give yourself permission to spend in those years when you're having health is good and you have the ability to really enjoy that spending because you may not always feel that way. So I think that's an important dimension of this as well.

[B]

You know, Christine, I tend to agree with you. Cause this is what I've seen in my parents is that as they move into their slow go years, they're spending less. Bill Bernstein argues that people spend less because they have to and that those who actually have the means don't actually spend less as they move into those, you know, slow go years. You think he's right? I mean, you guys are both citing data saying kind of opposite things.

[C]

So David Blanchett, who was my former colleague at Morningstar, has looked at this issue. Even with wealthier households, they tend to exhibit that pattern of spending a bit less. But Bill is onto something in that wealthier households tend to be healthier. And there's a real connection there, that if you are someone with more means, you've had more healthcare, you've had better quality healthcare throughout your life, you're more likely to live a bit longer. So some folks may be in that cohort that is still spending and living it up later in life. But when we look at the aggregate data, when we look at even affluent households, we do tend to see that same pattern of people spending a bit less. Another thing that can come into play for affluent households is maybe there were two homes, but the second one just becomes too much to maintain. That comes into the portfolio and becomes an asset that the household can spend. So there are a lot of real world considerations there. But even wealthier households do tend to spend a little bit less when we observe the data over whole retirement time horizons.

[B]

That's a good possible explanation of that difference, is that the slow go years actually start later for wealthier people because they have better health. That's an interesting possibility. Well, Christine, it has been wonderful to have you here. Christine. For those of you who didn't catch at the beginning, she's the director of personal finance and retirement planning for Morningstar. She's going to be a WCICON keynote speaker this year. If you want to meet her in person, shake her hand, thank her for her work, ask her hard questions about retirement income, come to the conference. We'd love to see you there. It's going to be a great time. And it is CME eligible. So you can write off the cost of attending or use your dedicated CME funds to come. We'd love to see you there. Christine, thanks for your time today.

[C]

Thank you so much, Jim. It's always great to talk with you. Okay.

[B]

I hope you enjoyed that as much as I did. We've mentioned wcicon a couple of times in our discussion. You can sign up for [e-mail] you can come in person. Still, we've still got space, at least when I'm recording this. Possibly it'll fill between now and then, but I don't think so. I think we're still going to have space for you. And of course there's unlimited space to attend virtually, if you would like. The dates are March 25th through 28th. It is in Las Vegas. It is not on the Strip. It is close to the Strip. If you want to go there, you can. If you don't want to experience any of that Strip stuff, you can totally avoid it while coming to this conference. And you can just go for a fun hike out at Red Rock, which is probably way better in my view, than hanging out on the Strip all day anyway. But however you like to enjoy Vegas, you can come. WCIEvents.com As I mentioned, it's CME eligible, but it is worth it even if you had to pay the full price yourself. The reviews we get from this 99.5% of people say they would recommend it to their colleagues. Please come. I'd like to meet you personally. It fires me up for the Holy Year because I get to not only hear about your triumphs, I also get to hear about your challenges. And it directs our content both on the podcast as well as on the blog and in the newsletters on what we work on for the next year. Right now we're doing lots of stuff about retirement because you guys gave us that feedback that we want more retirement focused material. And so that's why we're talking so much about retirement, not only today, but in other episodes and on the blog itself. Thank you for helping us spread the word about this podcast. Whether that's directly telling people about it or just leaving us a quick five star review, those reviews do help people find the podcast and help them to listen to it and realize this is something that can help them in their lives. A recent one came in that said I was so angry, but then I found White Coat investor for the first 10 years of my career. After finishing internal medicine residency, I was working for another doctor as a W2 employee. Then 2015, I started working for myself as an owner of my small primary care practice. When I had to pay my first tax bill, I was in disposition disbelief. Then it turned into anger and frustration. I was in my early 40s and I had never learned or been exposed to basic investing and personal finance topics. I immediately started searching on how to lower my tax bill and to begin saving for my personal goals and even retirement. This is when I found White Coat Investor and now I can easily say that my personal and financial life has improved immensely because the simple but powerful principles discussed on the podcast and the forum thank you WCI for helping us become better doctors by securing Our Financial Future Futures 5 stars Congratulations to you on securing your financial future and thank you for leaving that review to help others to do the same. Brought to you by Laurel Road for Doctors Laurel Road is committed to serving the financial needs of doctors, including helping you get the home of your dreams. Laurel Road's Physician Mortgage is a home loan exclusively for physicians and dentists, featuring up to 100% financing on loans of a million dollars or less. These loans have fewer restrictions than conventional mortgages and recognize the lenders, trust and medical professionals credit worth, worthiness and earning potential. For terms and conditions, please visit www.l LaurelRoad.com WCI. That's www.l LaurelRoad.comWCI. laurel Road is a brand of KeyBank NA and an equal housing lender, NMLS number 399797. We'll see you next time on the podcast. Until then, keep your head up and your shoulders back. You've got this. The whole community is standing behind you and wants you to be successful. Successful. Let's do this.

[A]

The White Coat Investor Podcast is for your entertainment and information only and should not be considered financial, legal, tax or investment advice. Investing involves risk, including the possible loss of principal. You should consult the appropriate professional for specific advice relating to your situation.