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Moshe Milevsky

Retirement Planning > Spending in Retirement > Income Planning

Milevsky: The Most Important Financial Goal in Retirement Isn't What You Think

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Even more important than not running out of money in retirement is another goal: not having to make crucial financial decisions as you age.

“You want those to be on automatic pilot,” argues Moshe Milevsky, finance professor at York University in Toronto, and a member of the graduate faculty of mathematics and statistics, in an interview with ThinkAdvisor.

Further, he visualizes non-financial experts such as gerontologists, social workers and psychologists joining RIAs in the retirement conversation to help super-affluent clients plan for potential gerontologic health issues and other needs of the aged.

As for reducing, if not eliminating, financial decisions as one becomes older, guaranteed income products — aka annuities — fit the bill, Milevsky says.

In fact, annuities “must be a central component of the retirement portfolio.

“Stocks and bonds alone will never get you through the entire life cycle. You should include annuities to supplement them,” maintains the annuity expert.

In the interview, the professor recalls that in his college and early grad-student years, the “scientific philosophy” was that retirement income planning was the “nastiest” problem in modern finance, according to a branch of math related to engineering.

But “math will never solve retirement planning.” There’s much more to having a “satisfying, healthy and fulfilling retirement than ‘solving it,’” he contends.

Milevsky’s teaching focuses on wealth management, investments, insurance, pensions and retirement planning. He is also managing director of the consulting firm PiLECo.

He has published 15 books and more than 60 peer-reviewed scholarly papers, and given 1,000-plus keynote speeches and seminars. 

Longevity Insurance for a Biological Age” (2019) is one of his latest books.

ThinkAdvisor recently held a phone interview with Milevsky, speaking from Toronto, and a follow-up email exchange.

He praises comprehensive financial planning but cautions that, with the breadth of critical aspects, it “can’t be done in an elevator.”

Here are highlights of our interview:

THINKADVISOR: What’s a critical key to retirement planning?

MOSHE MILEVSKY: As you get older, you should make fewer financial decisions. You want those to be on automatic pilot. This goal is even more important than not running out of money in retirement. 

I’m in my early 50s chronologically, and I really enjoy the investment and portfolio construction process. I enjoy optimization. I hope to be doing all that a decade from now.

But in two decades, at 70, I’m not so sure. At 80, I’m not certain I’ll have the financial or technical acumen to deal with whatever investment vehicle will be around then.

And at 90, I won’t want to make these decisions.

I can assure you that if I ever reach 95, there’s no way I plan to log on to Vanguard or Fidelity anymore or check P/E ratios or payout rates.

If I’m alive then, I’ll be happy with a decent bowel movement!

So, as I age, I want to make fewer financial decisions. I want to set my finances on automatic pilot at retirement and live off the cash flow.

What’s a good product to use?

That’s one of the benefits of annuities. You just cash the check. No decisions. No asset allocation. No optimization.

I think that annuities — described these days as guaranteed income products — must be a central component of the retirement portfolio. It’s important in the later decumulation phase, quite obviously. 

Even in the accumulation phase, you have to start considering how annuities will be incorporated because stocks and bonds alone will never get you through the entire life cycle.

You should include annuities in the retirement income portfolio to supplement stocks and bonds.

Isn’t retirement income planning dependent chiefly on the “numbers” — the financial aspect?

My academic childhood and early years as a graduate student were spent imbibing the scientific philosophy that retirement income planning was the “nastiest” problem in modern finance because there are many moving parts and complicated decisions that lend themselves to control and optimization.

That [was from] a branch of mathematics related to engineering.

But math will never solve retirement planning.

I don’t think mathematicians are any better at figuring out retirement [than others]. Sure, the underlying mathematics can be quite beautiful and very inspiring — but it’s not just about the math.

There’s much more to a satisfying, healthy and fulfilling retirement than “solving it.”

I have a huge amount of respect for other areas of expertise for retirement planning — and not just the soft skills.

Such as what?

Think about advisors’ centers of influence — for instance, a CPA [or attorney]. [In the future], a center of influence might be a social worker.

I would like to see gerontologists, social workers and more psychologists as part of the retirement conversation.

I envision a day when the RIA that focuses on retirement will have someone [associated with] their office who’s a real expert in aging — not in finance. But they should be engaged in the retirement conversation.

With every client?

This is clearly not mass market. If your typical client has $200,000 and you’re putting them in an annuity, that’s not the client I’m talking about.

But if the client has $20 million or is a family office, say, you’ve got to have that sort of expertise as a component of your [practice]. 

It should be part of the conversation about family dynamics and issues that may be problematic down the line concerning gerontologic needs and health issues.

What’s an example?

Who’ll be taking care of this [client] as they age biologically? That’s where the gerontologist comes in. lt’s part of the business of aging and managing financial affairs.

These are things that financial advisors aren’t trained to do and have no interest in doing.

Broadly, what do you like about the way financial planning is done today?

I like the comprehensiveness and the fact that advisors are trying to collect more and more data points about clients before giving them investment advice.

There’s a questionnaire they have to fill out, but what I’m talking about goes beyond what’s mandated.

Let’s understand the family dynamics and different sources of income. That’s comprehensive.

It can’t be done in an elevator.

Is there anything specific that you dislike about how financial planning is conducted today?

There are many financial advisors who are just salesmen. They just want to sell stuff.

So what I see is tremendous heterogeneity in financial planning, which is a fancy way of saying there’s a mixed bag out there.


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