0:00

The purpose of retire with style is

0:02

to help you discover the retirement income

0:04

plan that is right for you. The

0:06

first step is to discover

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your retirement income personality. Start

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by going to

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resuprofile .com/style. and

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sign up to take the

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industry's first financial personality tool.

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for retirement planning. Retirement

0:41

just isn't what it used to be.

0:44

but that's a good thing. This

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week, Alex and Wade sit down

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with our guest, Jason Fickner

0:51

to explore why protected income, annuities,

0:53

and other evolving retirement strategies

0:55

are reshaping how we think about

0:57

the golden years. Hi

1:01

everyone, welcome to retire With Style.

1:03

I'm Wade, I'm here with

1:05

my co -host Alex, and we

1:07

are joined today by a repeat

1:10

guest, Jason Fickner. who's played

1:12

a lot of roles and plays a

1:14

lot of roles in the world out there.

1:16

The Alliance for Lifetime Income, where he's

1:18

an executive director and senior fellow. at

1:20

the Alliance's Retirement Income

1:23

Institute. Jason is

1:25

also a chief economist at the Bipartisan Policy

1:27

Center. He has played a lead role

1:29

in the past at the Social Security Administration,

1:31

we're very happy to have you back

1:33

on the show. Again, Jason, to talk about

1:35

everything going on in the retirement income

1:37

world. It's great to be here Wade, now

1:40

It's good to see you both again. Absolutely.

1:43

and I saw you in person in

1:46

October when when I was at the

1:48

Alliance for Lifetime Income Summit in Washington,

1:50

DC, next door to the White House

1:52

at the Willard Hotel, which I see

1:54

in the news quite a bit, hosting

1:56

many different political events and so forth.

1:59

but it was a great event and we're happy to

2:01

have you here to talk about that and

2:03

other broader issues in the retirement income world.

2:05

Thank you. I appreciate that and we can

2:08

start wherever you want to. Obviously, the protected

2:10

retirement summit that we had on October 9th

2:12

at the Willard. was

2:14

fantastic. And again, you know, Washington

2:16

D .C., the Willard getting a

2:19

lot of attention now, post -election all

2:21

the different characters that are coming

2:23

and going around Washington DC as

2:25

we head into the inauguration in

2:27

January 20th. But it was a

2:29

really good summit. We had a

2:31

lot of good discussions at the

2:33

industry with consumers, with retirement specialists.

2:37

So it was a lot to talk

2:39

about research, social security, protected income, and -plan.

2:41

What do you want to start, my

2:43

friends? Yeah, I covered everything. mean, one

2:45

of the really unique aspects of it

2:47

was the consumer panels. It says that

2:49

might be a good starting point, just

2:52

hearing the perspective of individuals. Some

2:54

who were already retired, some who

2:56

were getting closer to retirement, in

2:59

one case, it was kind of

3:01

fun to see Michael Finka's mother

3:03

was one of the panelists as

3:05

well. so a lot of interesting

3:07

insights came out of those conversations

3:09

about people as they're getting closer

3:12

to retirement. job

3:14

insecurity and concerns. There was one

3:16

individual who lost his job

3:18

and was really struggling to find

3:20

a new position. A

3:22

few other people though, were showing the

3:24

entrepreneurial spirit of, I know one. One

3:27

couple had created a wedding venue. That's

3:29

kind of a side. hustle them.

3:31

Another one I didn't fully understand the

3:33

terminology, but it sounds like he was

3:35

a teacher and a part -time butcher on the

3:37

side of that. That

3:40

was kind of the biggest takeaway

3:42

for me was just hearing about

3:44

those experiences and. What

3:47

did you take from the consumer

3:49

I I think to broaden this a

3:51

little bit about the consumers and

3:53

why the alliance lifetime income is so

3:55

important is that it is focused

3:57

on the consumer. So it is the

3:59

one organization that speaks on behalf consumers,

4:01

like a consumer voice voice conferences it's

4:03

not just industry and academics academics. And you

4:05

find and think you're pointing on this

4:07

way it is that way, is that is

4:10

not the same for everybody, and it

4:12

also is not the stereotypical, for most people

4:14

now, like we used to think about

4:16

the movie On to think about the movie you Golden Pond, where

4:18

in a chair, 65, sit in the chair, cabin by

4:20

the water, water, and never do anything again.

4:22

again. In In fact, we might consider the

4:24

idea of retiring the word the word because

4:27

it no longer fits for many people. people.

4:29

There are, you know, we're living longer, longer, we're concerned

4:31

not just with but with health span, how our

4:33

healthy years will be included in our

4:35

retirement years, years. whether we're going to

4:38

work in retirement, whether we're going to

4:40

volunteer, to whether we're going to work longer,

4:42

all these things come out of this.

4:44

of this. you mentioned the entrepreneurial, the so

4:46

that the wedding venue was a venue a person, they bought

4:48

an started realizing they could rent the space out

4:50

because they had a great venue. the And people

4:52

had a can we rent it out for a

4:54

wedding? great a wedding? they We didn't. a great venue, I

4:56

became part of your business and now they're booked.

4:58

rent the space out, because they had some get a semester But you

5:01

saw But you saw people panel panel that

5:03

were concerned about spending their money in

5:05

retirement. And that's where we

5:07

start coming in with the help of help of

5:09

strategies and how we can help

5:11

people convert some of that savings some of

5:13

income. to So they do feel comfortable knowing

5:15

they have enough money and retirement to spend

5:17

to make their ends meet and live

5:19

the lifestyle they want. live the And that goes

5:21

into some research that in done as well

5:23

that talking about how income should be an

5:25

asset class should be an financial advisors talk to

5:27

people. talk to people. We talk about education

5:29

later, later, but but also the if have

5:31

about running out of money. out of money.

5:33

And that's a legitimate concern because people

5:35

do not know how long they're going

5:38

to live. long They are worried about are

5:40

environment this environment They're worried about market returns

5:42

and volatility and sequence of return risk. of

5:44

return And what you find is that

5:46

the consumers are not unintelligent. They're not stupid.

5:48

They're smart. They're just scared. And they

5:50

And they need help and guidance, figuring out what

5:52

they can do to help make sure their

5:54

financial assets last in retirement. So they can live comfortably.

5:57

can live comfortably and I think that's where we come

5:59

in all we're all trying help. And a

6:01

lot of new research was

6:03

also released, not just as

6:05

part of the summit, but

6:07

in the months leading up

6:10

to that as well. And

6:12

the protected retirement income, protected

6:14

income study, the Prip, isn't

6:16

that the right? Pia. Yeah,

6:18

they call PIP. Yeah, they

6:20

call PIP. Yeah. P-R-I-R-I-P. So

6:23

if you Google, P-R-I-P, align,

6:25

select, and then come, it'll

6:27

pop up on a Google

6:29

search. But it really is

6:31

to protect the economy. Rest

6:33

and peace. I know, it's,

6:36

everyone tries to figure out

6:38

what's a good name to

6:40

have, you know, all these

6:42

research, you know, the HRS,

6:44

Michigan, Shad is with, you

6:46

know, the Federal Reserve. What

6:49

the think is mom fly, coach, business

6:51

or first class? I haven't let that

6:54

thought go. It's been floating in my

6:56

head for the last five minutes. Do

6:58

you know what she flew? And did

7:00

you have the receipt? I did not.

7:03

That's what I want to know. I

7:05

did not look. We were hoping she

7:07

was going to bring some baby pictures

7:09

for the slideshow. big disappointment. But that's

7:12

my fault for not prompting you to

7:14

bring more. And I love the ungold

7:16

and pawn reference. I thought you were

7:19

going to throw a cocoon or something

7:21

like that. Well, that's, you

7:23

know, just to jump ahead, we'll drop back.

7:25

But, Cone's an interesting reference you make there

7:27

because we had Ken Dyke Wall do a

7:29

keynote talk. And he basically showed William Broomfield.

7:31

Is that the guy's name? Broomfield, whatever the

7:34

main actor was from Cajun. Well, Rimbly, Brooke,

7:36

well, whatever. But go, I know what you're

7:38

talking about. Roop and Grimley. So it's only

7:40

like 45 years older. But the thing is,

7:42

they show his picture of what he was

7:44

in the movie and he's like 45 or

7:46

50. And he looks like he's like 75

7:48

in today's age. And so what that just

7:50

shows you is. has has changed,

7:53

how health has changed,

7:55

how we have changed,

7:57

and how we need

7:59

to talk about the

8:01

changing nature of retirement

8:03

nature we are living

8:05

longer and it also

8:07

means we're changing. longer and it

8:09

also Security and our assets

8:11

need to last longer as

8:13

well. our assets was kind of

8:16

the as well. So that was kind of the

8:18

back. together. We can come back. There was a

8:20

lot of good of good researchers in security, how they

8:22

need to help. how they need more of a a

8:24

particular income, how they can more of

8:26

a particular income, income, how we we basically now less

8:28

less people have pensions that to replace

8:30

that particular income through some sort of

8:32

annuity or particular income structure through a

8:34

DC structure through a And also And you know,

8:37

you think about the, the generations coming

8:39

behind us, us. you know, for those of

8:41

those, about peak about peak this is the this

8:43

is the, know, the generation today,

8:45

turning turning 65, starting this year

8:47

in 2024, and continuing through 4 .1

8:49

million Americans are turning 65

8:52

every year. 65 ,200 a day.

8:54

We caught our caught our peak 65 But

8:56

if you go 30 years behind millennials are

8:58

born, there are are now the peak millennials.

9:01

There are more millennials there are

9:03

peak 65ers, and they're following 30 years

9:05

behind. They're going to have same

9:07

problems, maybe even greater problems we have

9:09

to solve problems, our even when it

9:11

comes to retirement security. their self, and work our What

9:13

you start thinking about now is

9:15

you have the current generation that's

9:17

retiring that needs protected income, but

9:20

they also have social security and

9:22

generation that's retiring, that but the generations that

9:24

income, are the the generation. And

9:26

most of them will retire without some sort

9:28

of protected income besides social security.

9:31

but Social is only designed to replace about to

9:33

of your income for the average person. for the

9:35

average person, not 70% or 80 most most financial

9:37

advisors think you should have in

9:39

retirement. So these things came in the peer as

9:41

well and how we how we actually, what issues

9:43

you need to be need to be aware of,

9:45

the educational gap we have and the

9:47

professional industry gap in helping reach those

9:50

people they can have protected income retirement? Yeah,

9:52

I I think one of the

9:54

statistics that stood out that stood private

9:56

sector employment employment, 60% of of people in

9:58

the past would come to with a

10:01

traditional pension. That's down

10:03

to 4 down to 4% the younger

10:05

generations. Yeah, for for most people, you

10:07

know, it's public sector sector workers a

10:09

have a defined benefit pension

10:11

plan for most private sector

10:13

workers private sector workers is way it says about 4%.

10:16

You know, and So we can be timely

10:18

or this is of of Thanksgiving. But there there

10:20

was an article in in Wall Street

10:22

Journal Journal talking is now is to

10:24

shift their defined pension benefit plan

10:26

to a cash to plan or buy

10:28

people out or have a risk

10:30

transfer or sell it to an

10:32

annuity company. and basically get an annuity

10:34

payment instead of a defined pension

10:36

plan. get an annuity payment instead of a

10:38

defined pension plan. Kodak. Kodak. still

10:40

in business. in business? So this is what you, the

10:42

this is the interesting about. trying to

10:44

get into crypto get it years ago or

10:46

something like that. Am I wrong? or

10:48

something like that. Am interesting about it, again,

10:51

this is for those who about, again, this you

10:53

can those who want to, you know, again, you and Wall

10:55

Street Journal. Pension think it

10:57

and at the New York Times, it was a

10:59

journal. I think it was a journal, the New when they it was

11:01

bankrupt or came out of it, they started their

11:03

pension plan again and funded it. And they've

11:05

done so well on the market they now is

11:07

a larger asset, it is more than fully funded.

11:09

it. So they want to wait, are are you telling me this

11:11

is the first time? time, Bitcoin fixed it?

11:13

it? interesting is because or not. funded or more so, they're

11:15

is to it's fully funded or more so,

11:17

they're going to cash it out and

11:20

put it on their balance sheet. unfortunately, it's

11:22

not benefiting the workers, it's the the the company, and

11:24

this goes into the idea about how, you know,

11:26

the you know, I think reason why I

11:28

think defined plans plans are so important for

11:30

people that they that they get the benefit

11:32

of the market return. return. And of

11:34

course, what we have to do is

11:36

help them manage the sequence of return

11:38

risk, the ups and downs that ups the

11:40

volatility, that happen, the have better solutions that

11:42

they have. solutions so they weather those storms in

11:45

retirement. weather those storms in that's what we're seeing again

11:47

is the decline of again is the the rise

11:49

of plans, the rise of It is a DC

11:51

world now, and and that's part of the

11:53

new three -legged stool. The three -legged stool that

11:55

we talked about for retirement Security and DB pension

11:57

and savings. And now it's, you know, now it's, you

11:59

know, - security has got some financial challenges

12:01

but it will be there in some

12:03

way for people. Now your DB plan

12:05

is a defined contribution plan which we

12:08

had to help people convert into some

12:10

sort of protected income at least partially.

12:12

And then the third leg of the

12:14

stool, individual savings, either people save more

12:16

or they may have to work partially.

12:18

And then the third leg of the

12:20

stool, individual savings, either people save more

12:22

or they may have to work part-time

12:24

jobs, whether it's starting a wedding planning

12:26

and a wedding planning and a wedding,

12:28

they can be secure. Sweeney

12:32

Todd. Oh, don't

12:34

go there. That's

12:36

your solution. Sweeney

12:38

Todd. No meat

12:40

pies for me.

12:43

So in talking about the three-legged

12:45

stool with the pension legs going

12:47

away, having to be replaced by

12:50

savings, and then you mentioned the

12:52

Social Security, certainly I agree, Social

12:54

Security is going to be there

12:56

in the future, maybe a question

12:58

a lot of people have since

13:00

the election, is there any new

13:03

information about the prospects, both for

13:05

Social Security and Medicare in light?

13:07

So the news sort of today

13:09

was President Biden was going to

13:11

propose that Medicare Medicaid cover weight

13:13

loss drugs, which would have billions

13:16

of dollars a year in those

13:18

programs, but the Trump administration would

13:20

have to approve it. So I'm

13:22

not sure it's going to happen.

13:24

Both candidate Trump and candidate Harris

13:26

ran on a campaign of not

13:29

touching Social Security. And both also

13:31

ran on certain platforms that could

13:33

decrease the revenue into the trust

13:35

funds for Social Security, like potentially

13:37

not taxing tips, or not taxing

13:39

Social Security and retirement. Both of

13:42

those would have revenue implications for

13:44

the Social Security trust funds if

13:46

changes were made under President Trump.

13:48

But in general, the president of

13:50

Lacthesity is not a good type

13:52

of security, so there's technically no

13:55

changes forthcoming on reform. However, what

13:57

I would offer is potentially a

13:59

silver lining. always thought I was going thought

14:01

it was going to take at the end of

14:03

their term the end of their term to

14:05

do social security reform, a whether it's a

14:07

or how they come out and come out and support

14:09

reform. President Biden Biden been a one Had he come

14:11

out choice, was he come out when he

14:14

was running as a candidate look, I'm look, I'm

14:16

going to do one year. I'm I'm

14:18

that bridge, you guys. I'll want it back

14:20

to bipartisanship. I'll I'll make all the heavy

14:22

choices. I'll I won't run again and did

14:24

that in the start. He could have

14:26

done social security reform in his last two

14:28

years after after the midterm. If President Harris Harris had won,

14:31

would my guess is he would not have so

14:33

secure a form for eight years if she'd be

14:35

running for re -election at four, and

14:37

that puts off the and that puts off the

14:39

third here is President Trump has is

14:41

second term, he cannot run for

14:43

a third. term, he cannot run for a third, and

14:46

maybe. maybe after the the 2026 when when

14:48

he has two more years left in

14:50

office, office, maybe the guy the guy that

14:52

wants to come out and say, say, I'm

14:54

going to save security. and

14:56

would back a commission. And if you

14:58

And if we think about how

15:00

this looks, you know, usually the President's party

15:02

loses seats in the house

15:04

during a midterm. Republicans

15:07

have the House into the

15:09

next Congress starting in 2025 by a by

15:11

a very small margin. which which means

15:13

if you were just betting today

15:15

on history, you would bet that the

15:17

Democrats would retake the house in

15:19

2026, in 2026, great 2027. So a Democratic Senate,

15:21

and a Republican President

15:23

and a could be a

15:25

good mix to do could be a

15:27

good mix to do Social or

15:30

2028. in 2027 or 2028. Come

15:32

back and talk to me in two years

15:34

and we'll see. in two years, and we'll see. Yeah, there's still

15:36

going to be five or six more years

15:38

after that before the real panic ensues. the real

15:40

panic ensues. So to have to take some courage

15:42

to act some sure. to act for that's the key

15:44

point is courage. And we can't let off

15:46

the gas we can't the education, that the the we

15:48

wait. that the the larger the changes are gonna

15:50

have to be and more are going to be

15:52

to make this work dramatic to make this

15:54

work overnight. And I know you at Social

15:56

Security, you you a lot of emphasis

15:58

into redefining Just using the the

16:00

terms that instead of of calling it the

16:03

full retirement age or the early retirement

16:05

age, it's the age, benefit age and

16:07

so forth, but we have seen

16:09

this transition. It It seems like we're

16:11

on a trend now, we're next year. year, there

16:13

may there may be a bigger percentage

16:15

of the population claiming after their full

16:17

retirement age than claiming at 62. claiming at 62.

16:20

When I was at Social When I was at

16:22

Social Security as a deputy commissioner,

16:24

we were noticing the agency, if you

16:26

went into, agency has agency has roughly

16:28

10 or 13 ,000 field offices. sure sure

16:30

the number might have closed since closed

16:32

but a lot of field offices. of

16:34

And the number one question that

16:36

Social Security would get when someone went

16:38

into a field office of should I

16:40

claim? and the number one The number

16:42

that Social replaced with a Social Security card

16:44

to get married, you lose it, you

16:46

replace it, but office is when should

16:48

I I benefits? And happening is

16:51

is Security Administration was using what's called

16:53

the break was using what's called the In other

16:55

words, Social Security is based on

16:57

a Social Security is based on a which is now

16:59

where your those age, retiring today, those you

17:01

get a reduced benefit if you claim

17:03

before if you claim before early as as 62. But

17:06

but presumably for a longer period of

17:08

time because you're claiming it early. and

17:10

if you wait until after your forward-time up to to 70,

17:12

you get a higher monthly benefit. benefit. And

17:14

what Social Security are telling people, if they

17:16

walked in at 62, they'd say, hey, if

17:18

you take benefits to them you'll be ahead for

17:20

14 years. 14 years

17:23

of benefits and you would break even. after

17:25

14 years. And people

17:27

heard, I'd be ahead for 14 years, sign

17:29

me up. And we never told them

17:31

that they lived past 76, they didn't be

17:33

behind for the rest of their life. And

17:37

that language, we that language, we started of the

17:39

got rid of the breakeven analysis, put put

17:41

out a new two about when when to

17:43

start security that was based on that

17:45

decision that made you think about your

17:47

health, your assets, your savings, your your spouse

17:49

because when spouse, can affect your you claim can

17:51

well. spouse And that forced a conversation,

17:53

and we also had a little chart a

17:55

showed chart were going to get that ,000

17:57

a month at your a month of forward coverage of

17:59

67, amount would be $720 at

18:02

each 62. That's a

18:04

28 % reduction in your monthly benefit

18:06

for the rest of your life, where

18:08

if you waited until age 70,

18:10

it's a 32 % increase. So you

18:12

basically had this difference between age 62

18:14

and 70. was 77 % different. So

18:16

you could get a 77 % greater

18:19

monthly benefit by waiting from 62

18:21

to 70. And we've been trying for

18:23

years to change how we talk

18:25

about this. So Social Security calls 62

18:27

the early eligibility age. We should

18:29

call it the minimum monthly benefit age.

18:32

We call age 70 the maximum

18:34

monthly benefit age. I have no

18:36

idea why they call each 67

18:38

the normal or full return age

18:40

one what's normal 67? some people

18:42

think it's 65 seven what's normal

18:44

anymore It doesn't matter. It doesn't

18:46

matter. Then the idea of full, if

18:48

you have a full glass of water, you

18:50

cannot add any more water into it

18:53

without it spilling. So why do we have

18:55

a full retirement age which allows you

18:57

still to claim three more years later and

18:59

get more money? so the nomenclature off

19:01

and there's a bipartisan bill that would change

19:03

that. We're hoping that hopefully, go through

19:05

next year there's bipartisan support to force the

19:07

agency to change that nomenclature because that

19:09

makes a difference. And age 62 is still

19:11

the modal age that people claim but

19:13

we have seen a trend over the last

19:15

several years of more more people claiming later

19:17

than 62, and to age point

19:19

more towards a full time in age.

19:21

If If you're looking for more

19:23

personal advice, Take a look

19:25

at this episode sponsor, McLean Asset

19:27

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19:30

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19:32

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19:35

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19:45

notes to get your free e

19:47

-book on retirement income planning. Yeah,

19:50

it's been a remarkable trend because we

19:52

used to talk about 55 -60 % of people

19:54

claiming as soon as they could at

19:56

62 and that number at this point is

19:58

to like 27 28. It's It's

20:00

still a big number, but This is where the

20:02

Royal is where retirement community and the advisory the

20:05

retirement community, should take a lot community, I

20:07

think should take a lot of

20:09

credit, because at Social Security over a Social

20:11

Security over a decade ago, when

20:13

I read the financial press, Market Watch, got

20:15

who financed whatever I read, most people were in authors

20:18

were were talking about the break -even

20:20

analysis and saying it it 62, so

20:22

you'll be be ahead years. years. Now a a

20:24

complete 180. Now Now most people say, if you really

20:26

if you really need the money, you take

20:28

it when you need it. to afford

20:30

delay, you're off off to lay until 70

20:32

the higher of the higher spouse of

20:34

higher higher inflation value. an annuity value.

20:37

done a 180 on that. And I

20:39

think that's helped people understand and have

20:41

a conversation with the kitchen table the family

20:43

the family level, the financial advice with

20:45

their clients, The the is writing about it. And

20:47

And that's also made a big difference

20:49

for how we talk about talk about annuities, because

20:51

Security wait for it, it's an an

20:53

annuity. And sort of talk about to talk about

20:55

a as a protected income and having

20:57

an additional protected income income security social

20:59

us to have a much larger and

21:01

more rich conversation with the public

21:03

about how they should think about protected

21:05

income in retirement. Yeah,

21:07

thank you for bringing it back

21:09

to to annuities and income. income. I'm saying, yeah, social

21:11

security, let's get back to what

21:13

was at the conference as well.

21:16

But right, the first step is, if

21:18

you're thinking about adding protected income, you

21:20

you wanna take advantage of delaying

21:22

social security because it's still it's still

21:24

on calculations from the 1980s where

21:26

people are not living as long

21:28

and interest rates were higher you

21:30

so you really benefit from delaying. that's

21:32

But then like to have still, you'd like

21:34

to have more protected, reliable income.

21:37

income. That's where where the Alliance

21:39

for Lifetime Income comes into play play

21:41

the transition to to define pensions where

21:43

people are managing 401k investment balances

21:45

on their own on their own if they

21:47

want to fill that gap with

21:49

protected income. income. That's where the where

21:51

the of of the annuity fits to

21:53

augment and enhance the social security

21:55

benefit and replace the traditional defining benefit

21:58

pension that fewer and fewer. fewer. have.

22:00

Yeah and I think wait that's the

22:03

important thing to hit home so I'm

22:05

going to repeat exactly what you said

22:07

and say maybe a little louder so

22:09

folks who are listening understand. If you

22:11

go back to the traditional two-legged stool

22:14

which was Social Security at DB pension

22:16

and personal savings. You get a paycheck

22:18

when you work. When you retire, Social

22:20

Security gave you a check a month

22:22

and your DB pension plan gave you

22:25

a check per month as well. So

22:27

you're basically getting a paycheck when you

22:29

retired. Social Security and your DB pension

22:31

paychecks were supposed to basically place around

22:33

70 or 80 percent. Social Security about

22:36

40, your pension added to the 30

22:38

or 40. There's your 70 or 80

22:40

percent. Without that DB plan now, you

22:42

have to make up the difference. You

22:44

can't just rely on Social Security for

22:47

protected income. Now you've got that defined

22:49

contribution plan. And some people are used

22:51

to the savings framework, accumulation, investment, maximizing

22:53

return, that they get to the point

22:55

of retirement, and they don't realize that

22:58

now they've got to turn that into

23:00

a spending plan. And you can talk

23:02

about whether a 4% drawdowns, the right,

23:04

you know, phrase, I don't think it

23:06

is the right framing, but that's drawdown

23:09

strategies. But the idea is if you're

23:11

trying to recreate the through they could

23:13

stool into a new through they could

23:15

stool, then the idea is how do

23:17

you convert some of your DC assets

23:20

into a paycheck and retirement that replaces

23:22

that 70 to 80% you want as

23:24

protected income. as a replacement rate in

23:26

retirement. And that's how we're shifting. We've

23:28

shifted from the DB and DC world.

23:30

Now we've got to shift the framing

23:33

from the savings to spending. And how

23:35

do we do that protected in retirement?

23:38

And one of the panels at the conference was

23:40

about the innovations in the defined contribution world to

23:42

bring the in-plan solutions or in-plan protected income solutions

23:44

that when you look at the menu of options

23:47

in your 401k stock funds bond funds and so

23:49

on and so forth but also some sort of

23:51

protected lifetime income products and there was big

23:53

discussion about innovations in

23:56

that area. area, talk a

23:58

little bit about what you've

24:00

seen there? what think we

24:02

are on the we are

24:05

of something really revolutionary and

24:07

amazing happening. And I

24:09

think maybe within the next

24:11

10 years, we might

24:14

see almost 100% of defined of

24:16

defined contribution plans sort some sort

24:18

of annuity option, a protected income

24:20

option. option. for the participants of a whether it's part

24:22

of a it's date fund or annuity option. option. And where

24:24

I think we're I think we're gonna start seeing different

24:26

solutions come in, this is what comes out

24:28

of the conference, is there there some people say, look, I

24:30

I don't want a lifetime annuity, I don't

24:32

want it, I don't need it, I don't or they

24:34

don't understand it, but you don't to do,

24:36

it's not one size fits all, it's what can

24:38

you have need it, I don't need options that could help

24:40

people. I don't So let's start with one that

24:42

I'm a big fan of, it's called the need

24:44

annuity. it, I don't So imagine someone comes in and

24:46

says, it, I I'm 62, I I wanna retire today

24:48

and I wanna take some security benefits. need it, I don

24:50

And we say, whoa, whoa, whoa, whoa, wait a minute you

24:52

know you're taking it it 62, that's monthly

24:55

benefit that lasts the rest of your

24:57

life the rest if we could structure some

24:59

of your DC assets to give you

25:01

your assets to give you your age 62 benefit years

25:03

is a fixed as a fixed terminuity?

25:05

That you a you to 67, or we do years to

25:07

get you get you to 70. Now you're you're doing is

25:09

you're giving them their age them benefit amount as

25:11

an annuity, and then you're facilitating delayed claiming,

25:13

which would give them a higher which would get

25:15

amount that's inflation protected for the rest of

25:18

the life. amount So that could be one way

25:20

of increasing source security the age, which would

25:22

give them better protection, as well as helping

25:24

to use that DC asset. Another

25:26

or something that TIA has, it's called the

25:28

trial annuity. as well as helping to if I want

25:30

this annuity, I have to hand is just

25:32

render so much money has, it's called the know. I

25:34

don't know if I'm gonna like it. know What

25:36

if we give you a two -year trial? So if

25:39

So if people are interested, it's called the called

25:41

the income You can You can Test Drive test drive and TIA

25:43

it up. it up. They They basically give you a

25:45

two -year trial. You start getting your monthly check monthly

25:47

check in and after two years two it, you just

25:49

continue the continue the the it's to If you don't

25:51

like it, you get your cash balance back. it, you

25:53

get your cash And that gives people a chance to

25:56

try out the to of having a lifetime income.

25:58

And that's another. And so were... other strategies people

26:00

are embedding new ideas now into target

26:02

date funds I think we're going to

26:04

see more of that option happening as

26:06

well and you can imagine someone when

26:09

you think about the behavioral framing we

26:11

talk about the benefit of like a

26:13

60-40 equity bond rate you know portfolio

26:15

split retirement we start talking about a

26:17

60-20-20 60% equity 20% fixed income and

26:19

20% protected income and we started talking

26:21

about that from the time someone takes

26:23

their first job of their 20s all

26:25

the way into their retirement age, we

26:27

want to call it retirement now, in

26:29

their 60s. They'll be looking at their

26:31

quarterly statement, their annual statement, they'll be

26:33

seeing their pie chart going for more

26:35

equities to more fixed income, and at

26:37

some point, they'll be protected income. They

26:39

will then come to expect and want

26:41

protected income of their retirement, they won't

26:43

be asking it, because we've been showing

26:45

it to them in their statements all

26:47

along. And I think we're on the

26:49

cost of that actually starting to half

26:51

the board. And

26:53

you're saying that may go even

26:55

to the very earliest ages of

26:57

plan participation, not just something in

26:59

the, say, five or ten years

27:01

before? I think we're going to

27:03

start seeing something where you're going

27:05

to start having plan participants tell

27:07

their, you have employers start telling

27:10

the plan sponsors, hey, the target

27:12

day fund is not giving us

27:14

an annuity option, and that's going

27:16

to start being in a target

27:18

day fund at the beginning. Yeah,

27:20

we've done some, wait and I

27:22

actually have done some work on

27:24

this with John Faustino and we're

27:26

finishing up a paper around this.

27:28

Well, I think we're done, but

27:30

you never know, right? There's no

27:32

like, review and revise kind of

27:34

thing. But let's just leave that

27:36

aside. No, but it was interesting

27:38

and there's a lot to share

27:40

around that, but I won't make

27:42

it part of this podcast. But

27:44

one of the things that I

27:46

think, you know, there's a bit

27:48

of a Halcyon kind of ideation

27:50

like, oh, this could happen, just

27:52

and we'll get right back to

27:54

where we were before. But I

27:56

think making these QDAAs, making these

27:58

defaults, making them to be. within

28:01

plans. I think that will

28:03

be the the

28:05

key there to split that thing wide open,

28:07

right? As opposed to just having them as

28:10

an option. If you just have them as

28:12

an option, I think they'll just not even

28:14

bother to be completely frank with you. And

28:16

I'm saying that without trying to be the

28:18

web blanket, if you will. Right. So I

28:21

think I agree with you. What I always

28:23

try to do is you're going to have

28:25

someone call in and say, I don't want

28:27

this mandatory default. I have the person that

28:30

doesn't like it. So to give you an

28:32

example, you know, target date funds. You are

28:34

not mandated to have a target date fund

28:36

in a retirement account or your individual account,

28:39

but it has become the default because it

28:41

is just easier. It follows portfolio theory about

28:43

reallocation throughout the life cycle, and folks just

28:45

do it. So you can see how people

28:47

can offer a target date fund. with a

28:50

protected income portion, but at the class of

28:52

it, that could become people's default. But they

28:54

could also go to their choice. You could

28:56

also, to your point out, have a QDA

28:59

and say, we're going to make this a

29:01

default unless you opt out. So instead of

29:03

opting in, you opt out. So you still

29:05

preserve the choice of someone saying no, but

29:08

the default is in there. We know it's

29:10

with default. It tends to have a big

29:12

impact on adoption. And what we've seen too

29:14

in terms of some stuff we've done and

29:16

then just reading up frankly and in anticipation

29:19

of the study I read up I like

29:21

just went through, you know,

29:23

like Sherman through Georgia, going through your

29:25

library of all the materials you have

29:27

on it. So, you know, we sort

29:29

of boned up and it led to

29:31

so many. It's a great resource, by

29:33

the way. But within that, we noticed

29:35

a lot of ideas around, and I

29:37

think you mentioned this, you socialized this

29:40

a bit earlier, that giving folks that

29:42

option when they can have it and

29:44

quote unquote just put it in your

29:46

mental compartment as the bond allocation a

29:48

certain percentage of your bond allocation and

29:50

then once you get to a certain

29:52

age you know you can defer that

29:54

decision for a little bit and it's

29:56

having that option allows you a little

29:58

simpler to maybe default because You

30:01

know, it's always been a bond, you know,

30:03

until you flipped it into annuity later.

30:05

Right. I think that's an interesting angle that

30:08

just seems to be the case where it would be

30:10

going. And I think that's what

30:12

we're going to get to. I think we're

30:14

going to start seeing that happen more and more.

30:16

each year or over the next 10 years,

30:18

especially as we get again, think about trust

30:20

fund depletion with Social Security being somewhere in

30:22

the early to mid 2030s, depending on how

30:24

the economy goes, if there's a recession, whether

30:27

it's tax law changes and we tax tips

30:29

or Social Security benefits, but let's say somewhere

30:31

in the early to mid 2030s, we are

30:33

gonna see more and more discussion about how

30:35

to recreate A dish to protect

30:37

their income and retirement, and folks who are gonna

30:39

look at their 401k and ask that 401k be

30:41

able to help do that for them. That's

30:46

a lot of sense. You know,

30:48

this is a great time for

30:50

us to be a part of the

30:53

retirement security industry, because we do

30:55

have a story to tell. There are

30:57

people who need our help and

30:59

assistance, and we have the products and

31:01

the solutions to help them. And

31:03

we also have, I think, a bipartisan

31:05

ruling this going to seem to secure,

31:07

secure 2 .0, and maybe there'll be a

31:09

3 .0, but retirement protection. and

31:12

security is still a bipartisan policy issue that

31:14

I think has a lot of legs

31:16

for years to come and we can make

31:18

a lot of headway on the policy

31:20

regulatory side to help make this happen. You

31:24

bring up the idea of secure 3

31:26

.0 that I think a popular question

31:28

is like, what would be on your

31:31

wish list if there is a third

31:33

iteration of the Secure Act that's introduced

31:35

so many changes? I know, This is

31:37

where, and I will recognize that you

31:39

know, had done with Secure and Secure

31:41

2. We've had more changes beneficially for

31:44

retirement security than we had the previous

31:46

I don't know, 15, 20 years,

31:48

so there's been a lot

31:50

of movement on the policy

31:52

side. It's the pre -Cambrian era

31:54

for security. Yeah, in this

31:56

defense, you know, should give them

31:58

time to implement, right? There was a

32:00

lot of. things in insecure in 2 .0 that

32:02

employers are still grasping with and want to

32:05

see how it works out it works out and

32:07

learning the rules and the processes, and

32:09

I get that. and I If

32:11

there's a a three what I think what

32:13

we we to do more of is

32:15

verify and validate where we are seeing

32:17

real barriers to adoption of annuities and

32:19

defined contribution plans. plans. Are Are there realistic

32:22

concerns about producer responsibility and legal and legal

32:24

What are we to do about defaults?

32:26

You can do more of that now, secure .0,

32:28

but where is the hang Why are Why

32:30

are we not seeing more adoption? I

32:32

think it's happening, but there's still some

32:35

barriers. still some How do we How barriers?

32:37

Is it available Is 2 .0? We in do

32:39

a better job. do a better job. educating

32:41

the public and employers about it the the barriers

32:43

we haven't solved yet and that should be

32:45

part of 3L. part of 3L. But 3O to have

32:47

to be an educational evolution from 2 .0

32:49

to 3 .0 before we 3L before what should

32:51

be in it. But I think we

32:53

need to make sure we do more to

32:55

reduce the barriers to we do more to reduce the barriers

32:57

to a new and that portability is still

32:59

one too, where if people change jobs, some

33:02

annuities where be hard to

33:04

transfer over or may be to

33:07

a new plan. to a new plan. And

33:10

I think we can figure out the pricing of that. out the

33:12

pricing of that and how that would

33:14

work. But right. I think we've

33:16

solved the world's problems here. problems here. Is

33:18

there anything else else like to

33:20

share? know you're so active in

33:22

doing so many different things. doing so many

33:24

different always curious what research you

33:26

guys have to look forward to

33:28

in 2025. to look forward to in good to

33:30

see good to see where the two years are

33:32

going. So a few things we're

33:35

working on. So on. So Wade

33:37

knows this this too, is there are

33:39

things that we, at Lifetime Income Income

33:41

Institute, and as research scholars

33:43

can say. it turns out

33:45

turns out the industry For For example,

33:47

the the industry cannot go around

33:49

talking about a paycheck for life. a

33:52

I don't know why, but they

33:54

can't but they can't. We can. Wade's done research

33:56

on protection as asset class. A lot

33:58

A lot of the industries were to

34:01

do that for compliance reasons even

34:03

though the academics and educators like

34:05

myself and that's the best way

34:07

because I totally understand why though

34:10

as as with my McLean asset

34:12

management had on that's like no-fly

34:14

zone so so we're gonna start

34:16

working on in 2025 is a

34:19

broader set of educational and compliance

34:21

issues. So one is figuring out

34:23

where we think about part of

34:25

labor for ERISA, SEC, for security,

34:28

FINRA for educational materials, where are

34:30

we seeing roadblocks and barriers to

34:32

having common English language discussions with

34:34

consumers and the public? This brings

34:37

up a good point just because

34:39

I say this with, again, now

34:41

with my recent head on, we

34:43

have a lot of advisors that

34:46

use this outside of McLean, right?

34:48

They subscribe and a lot of

34:50

broker dealers and getting this FINRA

34:52

approved, the outputs FINRA approved, we

34:55

have to take out sections because

34:57

certain words were mentioned that you

34:59

can't, if you mentioned fixed index

35:01

annuity. or just something like you

35:04

can't you have it you know

35:06

i mean like you can't mention

35:08

a product you can't mention that's

35:10

adding 20 disclosures without adding 30

35:13

disclosures or if the person using

35:15

the resa isn't licensed for literally

35:17

every you know everything it just

35:19

becomes a big puzzle

35:22

that doesn't fit together in terms of

35:24

trying to appeal to everything and then

35:27

you just say you know what I'm

35:29

just not gonna do it because I

35:31

don't want to like have a little

35:33

and that's gonna bite me back later.

35:36

Well and this is the hurdle that

35:38

we're going to try to start doing

35:40

more research on in 2025 because we

35:42

now with with research done by Wade

35:44

for example and Michael Fanca and David

35:47

Blanchett and others we now have the

35:49

empirical evidence to show the value of

35:51

annuities. for 30 years, but we're doing

35:53

it more in common language. And we

35:56

now have Congress and policymakers on our

35:58

side too. So now it's just pivoting

36:00

that story. I remember part of this

36:02

is because when I was at Social

36:04

Security, again, we got pushed back on

36:07

changing the language away from break even.

36:09

And it took a leader. And that

36:11

was Commissioner Mike Astru to say, we're

36:13

going to get this done. And Mike

36:16

Astru really did not like the fact

36:18

that if he picked up a Social

36:20

Security administration publication, and his deputy commissioner

36:22

at a PhD couldn't understand it, then

36:25

how is the public going to understand

36:27

it? And he made a big push

36:29

to do common English language materials. And

36:31

I think that's one of the things

36:33

we're going to try to help put

36:36

a bigger emphasis on for the regulators

36:38

going forward is let's have conversations, let's

36:40

get stakeholder groups together of industry, consumers,

36:42

regulators, and talk about how we can

36:45

speak to the American people in a

36:47

way they understand. Because if we're going

36:49

to do any sort of education materials

36:51

and think about your defined contribution, we're

36:54

going to give their employee. It's got

36:56

to be in plain English. It can't

36:58

be a 25-page document. It's got to

37:00

be a one-pager or a double-sided one-pager

37:02

that explains this. And it's got to

37:05

use terms they understand. So that's going

37:07

to be part of our research and

37:09

educational challenge that we're going to do

37:11

with the alliance, both in the research

37:14

side and the educational side, the educational

37:16

side. Great.

37:19

Amazing. Okay. Any questions? Did

37:21

you send Finkie's mom home

37:23

on Greyhound? Or did she

37:25

actually go back on? She

37:27

actually said a few nights

37:29

I think in South City.

37:31

She had a great time.

37:33

And she was one. This

37:35

is great. I mean. Yeah,

37:38

now the way he was also one

37:40

of the research fellows at the Reterm

37:42

Income Institute and said his bio, so

37:45

we appreciate all the help and support

37:47

and work he does for the last

37:49

lifetime income in the Reterm Income Institute

37:51

as well. And it's done some great

37:53

research that we promote heavily and that

37:55

advisors in the media like because it's

37:57

impactful, it's real, and it's, you know,

37:59

call the people who read academic research,

38:02

but I call it pracidemic, it's practitioner

38:04

academic, and that's what the alliance puts

38:06

out. So folks go to protect income.org,

38:08

they can go to the institute and

38:10

see all the research that we've done.

38:12

And again, it's written for both an

38:14

academic and a practical audience, practitioner audience,

38:16

audience, so advisories can do it too.

38:18

It's all on the web. There's no

38:21

paywall. Please feel free to use it.

38:23

Yeah, one of the other studies too.

38:25

I guess we should definitely mention the

38:27

license to spend, which probably also is

38:29

another term that companies can't use, but

38:31

the Finca and Blancha research on how.

38:33

And this is where I'm going to

38:35

talk about it. I didn't say because

38:37

it wasn't your research way, but we'll

38:40

bring up the license to spend. And

38:42

there's two things. One is license to

38:44

spend and the other is. stay the

38:46

course. And that one's a blanchet piece.

38:48

The general idea is what we have

38:50

found. This is important for advisors too.

38:52

So the license to spend is basically

38:54

people, you think about today if you're

38:57

working, you get a paycheck. And that

38:59

paycheck is basically your budget constraint. Out

39:01

of your paycheck, you pay your rent,

39:03

your mortgage, your utilities, you save, you

39:05

go to the grocery store, you go

39:07

to the movies, some travel. That is

39:09

what economists call a budget constraint. And

39:11

that becomes your license to spend. Well,

39:13

let's turn that and use that in

39:16

retirement. When people don't have an protected

39:18

income, they just see Social Security. They

39:20

use that as their budget constraint. And

39:22

they don't, they're fearful of spending their

39:24

assets in retirement. They're fearful of running

39:26

out of money. So they don't spend

39:28

as much as they actually could. if

39:30

they convert some of that defined contribution

39:32

asset base into additional protected income, that

39:35

then gives them more of a license

39:37

to spend. And what we have found,

39:39

what Blanchett and Finkin have found, is

39:41

that when people have more protected income,

39:43

they spend more retirement because they have

39:45

that additional license to spend. And that

39:47

becomes important for financial advisors as well,

39:49

because what we've also found out through

39:52

research, is that people have more protected

39:54

income. They can leave their other assets

39:56

under management and they tend not to

39:58

touch it as much, especially during market.

40:00

they haven't protected income now to fill

40:02

their budget constraint. And they're not worried

40:04

about, oh my gosh, the market's falling

40:06

10% 2030, sell it at the bottle.

40:08

They're like, no, I can afford to

40:11

ride this out. So it ends up

40:13

helping both the consumer and the advisor

40:15

in the long run. And so that's

40:17

from the research we're doing as well.

40:19

That fits both the policy aspect and

40:21

the practical aspect. Can you give me

40:23

flashbacks to grad school with the term

40:25

budget constraint? What economics is

40:28

all about? Well, it's an economist, it's

40:30

always a economist. I can't drop all

40:32

the target, but yes. Maximize your utility.

40:34

Well, that's interesting. But now you go

40:37

to maximize utility. So I will add

40:39

one thing too. When it comes to

40:41

Social Security, we shouldn't be trying to

40:43

maximize the lifetime income you might get

40:45

from Social Security. And there are a

40:48

lot of folks out there that try

40:50

to do that, because they use it

40:52

as an asset formula. You are trying

40:54

to minimize risk in retirement. And one

40:57

way to minimize your risk is to

40:59

have more protected income. And that includes

41:01

by delaying Social Security claiming if you

41:03

can afford to do so. Because that'll

41:06

give you a higher monthly benefit that's

41:08

inflation protected for the rest of your

41:10

life. So what I'd also ask is

41:12

we start trying to change the narrative

41:15

framing from the savings to that then

41:17

spending. narrative retirement. We also get rid

41:19

of this sort of invest, invest, invest,

41:21

how do I maximize return in retirement

41:23

and try to figure out how we

41:26

maximize income and minimize risk along the

41:28

way. across

41:31

all the different states of

41:33

the world. Exactly. All right,

41:35

Alex. No, well said, nothing

41:38

else. Just thank you, Jason,

41:40

again. Thank you for the

41:42

update and where things are

41:44

heading. I mean, it's a

41:46

bright future. And you're right.

41:49

What a time to be

41:51

alive. Exactly. I appreciate you

41:53

both. Thank you for having

41:55

me both on and happy

41:57

Thanksgiving. Likewise. Thank you, Jason.

42:00

Wade and Alex are both

42:02

principles in Management and Retirement

42:04

Researcher. Both are are SEC registered investment

42:06

advisors in in Tyson's Virginia. The The

42:08

opinions expressed in this

42:11

program are for general informational

42:13

and educational purposes only

42:15

and are not intended to

42:17

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on any specific securities. securities. To

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