100 Michael Finke: Retirees Should Calculate to Not Be a Loser
About Fun With Annuities® Episode #100
Once again, Michael Fincke brings the factual goods to my “Fun With Annuities” podcast. Even though Michael & I are the top 2 fan-boys of QLACs (Qualified Longevity Annuity Contracts), we showed our self-control to not go down the QLAC rabbit hole. Instead, the focus was Social Security…and a recent article in ThinkAdvisor called “Why Claiming Social Security at 64 or 67 Could Be a Big Mistake.” (link: https://www.thinkadvisor.com/ )
Michael started out “on fire” when he jumped in to explain the bonus retirees get from waiting to claim Social Security income benefit increases by using two simple steps. If you don’t do this right, then it can be a very costly mistake.
Then he pivoted to why the delayed claiming income step formula is supposed to be actually fair, but it is not! He went into detail to explain how to calculate the fair value. This part of the podcast is very detailed, but Michael simplified it so that all of us will fully understand how to do this for our specific situation.
One of the more surprising moments came when Michael pointed out something about Social Security that I wasn’t even aware of. The mortality tables that Social Security exclusively uses are in your favor. Yes! Not only is Social Security the best inflation annuity on the planet, it also has the best mortality tables for the consumer.
The final segment of the podcast revolved around a recent article Michael wrote, “How Inflation Really Hurts Retirees – And What To Do About It.” (link: https://www.thinkadvisor.com/ ). The great takeaway here is that inflation should be viewed through your own unique situation. Inflation affects every person differently, and Michael provided some good points on how to address that “gorilla in the room”….INFLATION!
This podcast is definitely a “play…repeat…play…repeat” episode. Enjoy!
"Essentially what you're doing when you’re delaying social security is that you are buying more of a government-provided, inflation-protected, annuity." — Michael Finke
Brief Bio on Co-Host: Michael Finke
Michael Finke, Ph.D., is Professor of Wealth Management, Director for the Granum Center for Financial Security, and the Frank M. Engle Distinguished Chair in Economic Security at The American College of Financial Services. He joined The College in June 2016, having served since 2006 as a professor and Ph.D. coordinator in the Department of Personal Financial Planning at Texas Tech University. From 1999 through 2006, he served as the Director of Graduate Studies at the University of Missouri.
Finke is a nationally renowned researcher with a focus on the value of financial advice, financial planning regulation, investments, and individual investor behavior. He was named to the 2012 Investment Advisor IA 25 list and the 2013 and 2014 Investment News Power 20. His research conducted with fellow professor Wade Pfau questioning the 4% rule of retirement planning was published in the Journal of Financial Planning and won the 2014 Montgomery-Warschauer award for the most influential article. He previously won the award with Thomas Langdon in 2013. He was also selected to present his research on financial literacy and aging at the 2015 MIT Center for Finance and Policy Conference.
Finke has published more than 50 peer-reviewed articles and is widely quoted in many of the nation’s leading consumer publications, including The Wall Street Journal, The New York Times, Time, and Money Magazine. He also has worked on white paper research projects for companies that include MetLife, Northwestern Mutual, OneAmerica, the Society of Actuaries, and TIAA.
Finke received a doctorate in consumer economics from The Ohio State University in 1998 and in finance from the University of Missouri in 2011, and his CFP® in 2006. Source: michaelfinke.com.
In this episode, The Annuity Man® and Michael Finke discuss:
- Delaying your decision to claim
- Insulating your income from volatility
- Inflation is personal
- Consequences of not annuitizing
- If you have a good reason to expect that you’re not going to live as long as an average American, then it makes sense to claim early. Unless you have a spouse who can continue to receive your benefit.
- Anybody who’s using stocks to compare the present value of future guaranteed income is insane. Insulate a portion of your income stock-market volatility, that’s just the right thing to do both mathematically and psychologically.
- Inflation is personal. It affects each person differently. When you’re planning for retirement, pay attention to what percentage of your expenses are subject to increases in inflation and what are “stable nominal expenses
- Stocks will be more volatile, and bonds less volatile. Either way, there is a lot of probability and risks involved.
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.