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An Integrated Approach for a Worry-Free Retirement

by Wade Donald Pfau

Pub Date: Sept. 30th, 2019
ISBN: 978-1-945640-06-3
Publisher: Retirement Researcher Media

A financial manual focuses on securing a rock-solid retirement.

In his book How Much Can I Spend in Retirement? (2017), the author gave readers a comprehensive analysis of the “risk premium” of the stock market, which relies on the notion that “while the stock market is volatile, it will eventually provide favorable returns for most retirees and will outperform bonds.” The three major categories of risk in such a setting, according to Pfau (Reverse Mortgages, 2018, etc.), are market volatility, spending shocks like major medical expenses, and the longevity of the retirees themselves. A promoter of the probability-based approach to retirement planning, he looks on these risks with the sang-froid of the practiced gambler. “They see the stock market as a straightforward way to obtain superior retirement outcomes,” the author writes of his fellow believers. “Safety-first advocates disagree.” In his new work, Pfau offers a correspondingly detailed analysis of a fundamentally different approach to retirement investment, the safety-first method, whose supporters “are generally more willing to accept a role for insurance as a source of income protection to help manage various retirement risks.” Using the simple analogy of mountain climbing, the author points out that the probability-based approach to retirement is mainly concerned with accumulating enough financial security to reach the summit whereas alpinists will readily admit that the descent is always more dangerous. “The objective of a retirement saver is not just to make it to the top of the mountain, which we could view as achieving a wealth accumulation target,” Pfau writes. “The real objective is to safely and smoothly make it down the mountain, spending assets in a sustainable manner.”

Throughout his densely packed account, the author helpfully lays out for readers the various aspects of his topic in a fierce amount of specific details. His book comes replete with useful charts and graphs and extensive suggestions for further reading. All of this supporting material is buttressed by Pfau’s own considerable skill at clarifying even the most abstruse subject facing retirees, whether it be the various kinds of annuities the author backs for his income-pooling conception of retirement income or the complexities of navigating those instruments, in the form of things like rollup and withdrawal rates. More and more Americans are retiring, and they are living longer than ever before. But the contours of that retired life have been fundamentally changing for decades; the days of people guaranteeing their financial securities with one simple retirement plan are largely gone. Pfau’s manual uses as its starting point this complicated new landscape. He carefully takes readers through the arcana of terms and plans and the realities they’ll face in their retirement years, explaining everything with a straightforward prose that will be a boon to those dealing with this challenging time. The author’s goal is to help individuals lay the foundation for not only financial competence in retirement, but also the ability to spend comfortably in those years. Pfau wants this group to achieve what he characterizes as the four financial goals of retirement: lifestyle, liquidity, longevity, and legacy.

A formidably detailed and invaluably clear guide to not just achieving retirement security, but also maintaining it.