088 David Blanchett: Retirement Income Investing in a Low-Yield World
About Fun With Annuities Episode #88
A true "rock star" in the retirement planning world, welcome to the Fun With Annuities podcast David Blanchett, the managing director and head of retirement research at PGIM Solutions. PGIM is the $1.5 trillion global investment management business of Prudential Financial. He also is a professor and consultant with The American College. Previously, David was the head of retirement research for Morningstar's Investment Management Group.
Podcast episode 88 primarily focused on David's timely article called "Retirement Income Investing in a Low-Yield World."
"The best thing you can do is to make 'easy buttons' and a way to enjoy retirement where you're not stressed out all the time when the market goes down." — David Blanchett
Because interest rates are at perceived all-time lows, I enjoyed hearing David's take on what people should be doing to plan for lifetime income during these times.
Our conversation addressed stocks, bonds, and the inclusion of lifetime income annuities to provide the needed "income floor" for people nearing or already in retirement. As David pointed out, investors are not always rational in how they plan on reaching their retirement income goals.
For example, he pointed out a survey from the Society of Actuaries that showed only 17% of pre-retirees planned to spend down their wealth in retirement, while 32% planned to withdraw only earnings and leave the principal intact. This is where I bluntly pointed out that "Jimmy Carter Yield" does NOT exist, and the former president is building houses instead of providing high-interest rates!
We addressed the fact that investors typically have a strong preference against purchasing an annuity for lifetime income, despite the fact that annuitization is widely considered the most efficient approach for generating retirement income and hedging longevity risk. Of course, I couldn't resist pointing out that every single U.S. citizen with a Social Security number already owns the best inflation annuity on the planet.
David agreed that Social Security is the best annuity … period!
This podcast was lively, fun, and brutally factual. David is a true thought leader in the retirement planning space, and you will love this podcast.
In this episode, The Annuity Man and David Blanchett discuss:
- People’s irrational preference
- A gap between perceived and actual ability
- Is cryptocurrency going to last?
- Investing when there are low yields
- In theory, people should be indifferent between spending down your portfolio and living off of it - but investors aren’t always rational, they have a strong preference towards not depleting their portfolio, they want to live off of the income.
- As you age, your probability of making a poor decision increases. At the same time, the gap increases between your perceived ability to make good decisions and your actual abilities.
- Blockchain technology is real, it has some potential public use but the value of cryptocurrency is effectively speculative and most investors are young people who have never seen market downturns.
- Don't focus on the fact that it could drop in value, focus on how it does in creating sustainable income.
Fun With Annuities® Podcast is hosted by America’s Annuity Agent®, Stan Haithcock, The Annuity Man®. Hear brutal annuity facts with no sales pitches from the top independent agent in the country, licensed in all 50 states. Author of 7 books, Stan dives deep on all annuity types and strategies. It’s fun, learning the contractual truths on how annuities actually work and if they’ll fit your personal retirement lifestyle.