Morningstar’s director of personal finance discusses her new book, the bucket approach, and why retirement shouldn’t be a math problem.
We’re doing something a little different this week. Amy Arnott and Dan Lefkovitz are flipping the microphone around and interviewing the anchor host of this podcast, Christine Benz, about her new her book, How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement. Christine is director of personal finance and retirement planning for Morningstar. She has been with the company since 1993, where she’s served as director of the fund research team, editor of Morningstar Mutual Funds, and cofounder of this podcast in 2019. She has written several books about investing. Christine is a proud graduate of the University of Illinois.
Background
How to Retire
How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement by Christine Benz
The Psychology of Money by Morgan Housel
Nonfinancial Aspects of Retirement
Annuities, Retirement Portfolio Planning, and Social Security
Retirement Income Style Awareness
Fritz Gilbert/The Retirement Manifesto
“The Ultimate Pre-Retirement Checklist,” by Fritz Gilbert, The Retirement Manifesto, March 27, 2018.
“Decision Rules and Maximum Initial Withdrawal Rates,” by Jonathan Guyton and William Klinger, FPA Journal.
The Bucket Approach
“The Bucket Approach to Building a Retirement Portfolio,” by Christine Benz, Morningstar.com, Nov. 23, 2022.
“The Bucket Approach Is Flawed—Here’s a Better Way,” by Rob Berger, Forbes.com, Aug. 2, 2020.
“Do You Need More Than 3 Buckets?” by Christine Benz and Susan Dziubinski, Morningstar.com, May 22, 2024.
Housing
Healthcare, Long-Term Care, and Estate Planning
Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances, by Cameron Huddleston, June 25, 2019.
Other
“Carl Richards: ‘Let’s Focus on Being a Little Less Wrong Tomorrow,‘” The Long View podcast, Morningstar.com, May 13, 2020.
Dan Lefkovitz: Hi and welcome to The Long View. I’m Dan Lefkovitz, strategist for Morningstar Indexes.
Amy Arnott: And I’m Amy Arnott, portfolio strategist for Morningstar.
Lefkovitz: We’re doing something a little different this week, flipping the microphone around and interviewing the anchor host of this podcast, Christine Benz, about her new book, How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement. Christine is director of personal finance and retirement planning for Morningstar. She has been with the company since 1993. She served as director of the fund research team, editor of Morningstar Mutual Funds, and co-founder of this podcast in 2019. Christine has written several books about investing. She is also the president of The John C. Bogle Center for Financial Literacy. Christine is a proud graduate of the University of Illinois.
Christine, thanks so much for joining us on The Long View as a guest.
Christine Benz: It’s my pleasure. This is very weird, but let’s go ahead. It’s funny to be in the interviewee seat for a change.
Lefkovitz: Well, absolutely. Maybe you could start off by talking about how the book came about. I’m also curious about the subtitle and if there’s any logic to the order of the descriptors that you used: Happy, Successful, and Wealthy Retirement.
Benz: Yeah, I love that subtitle, Dan. The project came about in conversation with Craig Pearce, who’s an editor at Harriman House. Harriman House has published a lot of terrific books, Morgan Housel’s Psychology of Money, and many other books by authors I respect a lot. And so, Craig and I had been talking about me doing a book for maybe five years, and I just could not find time. And so, Craig came to me one day and said, “Well, you know, you’re doing these interviews already with your podcast. What about a book that’s essentially a compendium of interviews on some subject?” And he knew that retirement planning was a key focus for me. So really the idea was his.
I will say, though, if anyone tries to come to you and says doing a book in this way will be easier than writing a book from scratch. I’m not sure at the end of the day that it was. But in hindsight, I love the humility that this project suggests, which is like, I’m not sitting here with all the answers. I do know people who have great insights into a lot of different dimensions of retirement planning and how about if we harness some of their wisdom into a single book. So, I love how it turned out and I love the humility that it expresses.
In terms of that subtitle, the sequence of happy, successful, and wealthy, I think that was Craig’s idea as well. And I think probably the main logic is that happy and successful come first, that yes, you do need to have your financial house in order to retire. You need the finances to line up. But ultimately, this is about taking a chapter of your life, maybe 25 or 30 years if you’re lucky, maybe even longer if you’re a FIRE person, and just maximizing it, trying to figure out how to make sure that you are achieving successes and that you’re also just smiling along the way.
Arnott: Well, I really loved the format of the book—the idea of when you read the book, you’re listening in on these conversations. And I think that just makes the content so much more accessible than it might be if you’re reading a traditional book about retirement, and I think it allows you to really cover a huge amount of ground. So, I really enjoyed reading it.
Benz: Thank you.
Arnott: In the introduction, you tell a very personal story about your parents in their later years. What did that experience teach you?
Benz: Yeah, thanks, Amy. Well, you both know I was very close to my mom and dad, and we’re a close family overall and lived like 45 seconds from my mom and dad. So, I was my family’s first responder in a lot of ways, but also, my husband and I spent a ton of time with my parents traveling with them. And my parents both experienced cognitive decline in their later years. And so, I was there a lot during that period, hiring caregivers, managing caregivers, managing the house, making sure the grocery shopping got done and all that stuff.
I realized how hard that life phase can be. But I also was thinking about how in a lot of ways my parents had a best-case scenario in that they had children who were very plugged into what was going on in their lives and their finances could support them to have in-home caregivers. And I guess the experience prompted me to want to focus more on this area because not everyone has that support system, not everyone has an adult child who works on financial matters for her day job. And so, I wanted to bring some of the key areas of knowledge in retirement planning to light in a single volume for people who are either working with an advisor or going the DIY route.
Lefkovitz: The book really covers retirement in a very holistic way. It’s not all about withdrawal rates and portfolio positioning and annuities. It really tackles emotional and psychological aspects as well. Can you talk about some of the overlooked retirement challenges that the book addresses?
Benz: Definitely, Dan. I think Michael Finke made the point in the book—and he definitely says this—he’s like, retirement planning is not a math problem. So basically, just stop it, people, if you’re just focusing on the calculators and all that stuff. You should do that, but don’t stop there is the point. So, I do think there are several aspects of having a happy and successful retirement that maybe are underdiscussed.
One is the loss of identity that can accompany leaving the workforce. And this is especially true for people who have high-status careers: physicians, attorneys, and so forth. But most of us carry around with us some sense of “this is what I do.” And then when you step away from that, I would imagine it feels different out there in the world with people not necessarily aware of what skill sets you had while you were working. So that’s one thing that we discussed in the book—coming to grips with that change in identity later in life.
We also talked about the importance of having a purpose, just having some animating force that gets you up in the morning. And Jordan Grumet in the last chapter I think hit this topic especially hard where he talks about what he calls Big P purpose, which is like the really aspirational things like climbing Machu Picchu or starting a foundation or something like that. So that Big P purpose in Jordan’s parlance. And then there’s what he calls Small P purpose, which is like things that give you joy on a daily basis, whether it’s interacting with your family or pursuing some hobby that you used to love when you were younger, but you didn’t have time for while you were working. And Jordan talks about how cultivating both sets of purpose is really important and not to sweat it too much. If you don’t have that Big P purpose, the Little P purposes that animate your days and give you joy, those are just fine. And those are what people will remember you for. So, I think that’s a dimension of retirement planning that is perhaps underdiscussed, just having something to get you up in the day.
And finally, relationships. Several of the interviewees hit that concept hard. The importance of maintaining relationships later in life. Laura Carstensen, a researcher at Stanford, went in depth on that topic. And she came away with I think, a reassuring point, which is that our friendship networks, our relationship networks, naturally winnow down a little bit as we age. But a lot of that is conscious that we may shed—I think she calls them peripheral others—we may shed some relationships that are OK; they’re good perhaps, but they’re not those really great relationships. And so, our social networks might get a little smaller. And the point is to know that might happen. Definitely keep building your next tier of relationships, but don’t sweat it too much if you step away from some relationships that were part of your life at one point.
Arnott: I’m curious, having talked to so many leading thinkers in this area and also having done so much of your own work, what do you think are the key disagreements or differences of opinion out there when it comes to retirement?
Benz: One that came out loud and clear in the interviews, Amy, was the role of annuities. We just saw a huge bifurcation in terms of opinions with people like Michael Finke and Wade Pfau, being generally more pro-annuity, pro-guaranteed income later in life, and then, people like Bill Bernstein, positively allergic to the idea of annuities. So that’s one key disagreement that I think is alive and well in the retirement planning community overall. And there are a lot of reasons for it.
One is that annuities are such a broad basket that it’s almost unhelpful to talk about them as some sort of cohesive whole because the products are also different. And then another is just the way that the industry has grown up, that you’ve got people who style themselves as insurance people, and then you’ve got the investment people, and the two don’t really get along. So, part of it, I think, is just an outgrowth of how the industry is configured. But that’s one key area of disagreement that came out loud and clear in the book.
Another dimension that came up, or another disagreement that came up, was the role of working longer, where you had several people say that there’s a lot to be said for working longer, working past the traditional retirement age of 65 or whatever. And then Fritz Gilbert was in the book saying, no, don’t necessarily continue working if your finances line up. You may be able to do something else that provides you a great sense of purpose and relationships and all that stuff that you’re getting from work. So don’t reflexively think that you’ve got to continue working if you want those lifestyle considerations to line up in your favor.
Lefkovitz: In that interview with Michael Finke, you talk about that sort of archetypal image of retirement from all the commercials, the couple sitting on the beach. Why is it problematic to think of retirement as a sort of destination involving sand and water?
Benz: I loved how Michael put it. He made the point that—the point is, you’ve got to relax from something, right? And I think we can probably all reflect on points in time where we were working really hard and then we had a vacation or a sabbatical and how much better that vacation felt because we felt like we really earned it. And I think that was the point that Michael was making there, that you need to have something that is – where you’re feeling like you’re accomplishing something. And then your relaxation is a really fantastic antidote to that, that you feel like you earned it, you deserved it. So, I think that’s the key point that Michael was making. And I hope people will think about that because frankly, I do think that a lot of people, when they retire, are burned out, right? Where they just feel like, I really need a break from this treadmill. And so, it might be tempting to just plan to fill your days with things that are really fun and relaxing. But that contrast is so important. And yeah, I hope people will internalize that idea as they think about their retirements.
Arnott: One of the first chapters in the book is about Social Security. It’s an interview with Mary Beth Franklin. Did you deliberately place that chapter toward the beginning because of its importance? And actually, later in the book in your conversation with Bill Bernstein, I think he makes the point that maximizing Social Security is actually more important than the asset-allocation decision for your portfolio.
Benz: Yeah, that was intentional, Amy. And really, we tried to organize the book in a way that would be logical as you’re thinking through the various aspects of your retirement plan. So, in my mind, maximizing nonportfolio income sources, which will be Social Security for most of us, a pension for some people, perhaps some sort of an annuity, thinking about that as really one of the first steps in the process should precede how you organize your portfolio, how you determine your withdrawal rate, and all that other stuff. So, it was an intentional choice because it is, I think, such an important first consideration when you’re thinking about the financial aspects of retirement.
Lefkovitz: Christine, in your conversations with the experts on withdrawal rates and retirement income and portfolio allocation, it seems like flexibility was one of the key takeaways, a common thread. There’s really no one-size-fits-all way to do it. But you did have some a-ha moments during the conversations. Can you talk about those?
Benz: So, one chapter is a deep discussion with Wade Pfau on his retirement income style awareness matrix, which you two will recognize. It’s really a style box for retirees where you plot yourself. You go through this series of questions that Wade and his partners have developed. I made Amy and John Rekenthaler, and I think Jeff, take the questionnaire. It’s very long. But you go through this questionnaire and it places you on the grid in terms of what you should be looking for in terms of your portfolio plan, your retirement income plan. And I love that that sends the message that we’re all wired a little bit differently in terms of what we’re looking for from our retirement plans.
So, for me, I think that I was plotted as someone who really likes some sort of guaranteed income. Basically, I’ve always worked in the context of an employer where I earn a paycheck, so I want to replace that in retirement. But I love that tool as a way of understanding yourself. Or if you’re an advisor working with clients, understanding each client as a unique individual about what they’re looking for in terms of their retirement cash flows. So, I think that that’s a really good framing device.
In terms of another a-ha moment related to withdrawals, the conversation with Jon Guyton, I thought was just really good because he’s so good at explaining things. He uses a lot of great metaphors to illustrate what he is talking about. And he talked about how this idea of taking a dynamic approach to portfolio withdrawals, so changing up what you take out of your portfolio on a year-to-year basis based on what’s going on with your portfolio. His point is that what you feel like doing with your withdrawals actually lines up with what’s the right thing to do from a financial standpoint. And his point was that’s not often the case. Like often the behaviorally satisfying thing is not the right thing to do from a portfolio standpoint. But if in a bad market, you’re feeling like, I want to tighten my belt a little bit, spend a little bit less this year. Well, guess what? That’s what you should be doing. And in a really great year like 2023, when the markets performed exceptionally well, if you’re feeling a little bit richer that year, well, guess what? It’s probably OK to go ahead and spend a little bit more as well. So that was a really interesting discussion about all of the different dimensions of retirement withdrawals. And one thing I love about Jonathan Guyton’s contribution is just that he is a researcher. So, he developed this guardrails approach to structuring your portfolio cash flows, but he is also a practitioner. So, he works with clients and really, I think knows the behavioral piece better than a lot of other folks.
Arnott: Yeah, I think having that mix of theory and practice is really helpful and gives him a unique perspective. We hear a lot about the FIRE concept, Financial Independence, Retire Early. And that does come up in the book, but it’s not really a main focus. What do you think we can learn from the FIRE movement and what are the notes of caution that you sound around it?
Benz: Well, I’ve really been happy to get to know a lot of people who are active in the FIRE movement. Jordan Grumet, who I mentioned, is one such person. Fritz Gilbert is another person tangentially affiliated with FIRE. And in terms of what you can learn, I think there’s a ton to learn about mindful spending. And the sooner we start thinking about that in our lives, the better. The FIRE movement is very much on the topic of really being thoughtful about where you spend, how you spend. I think the FIRE movement is incredibly valuable to anyone’s thinking. And so, I’ve learned a lot about that.
In terms of cautions, I get nervous when I talk to FIRE people who are actually retired and pulling from their portfolios, but they’re using research that’s been done for normal-length retirements to address a retirement that may be 40 or 50 years. I get nervous when I hear someone say, oh, I’m taking 4%. Or it makes me very nervous to hear someone talking about doing that with a 40- or 50-year time horizon. So that’s one main caution I get nervous —when I hear people apply FIRE withdrawal rates to that much longer time horizon.
Lefkovitz: In terms of your own work, Christine, you’re a big proponent of the bucket approach to retirement planning. It might be good for you to explain briefly what that is. But curious if any of the researchers have looked into how well it works in practice?
Benz: Yeah, the bucket approach, I always credit to Harold Evensky, who is a financial planner and financial-planning professor. And when I initially went down this rabbit hole of trying to learn about retirement planning, it was in a period when yields were very, very low. So, the old strategy of trying to subsist off of current income just wasn’t cutting it for most retirees. So, I remember talking to Harold one day. And by the way, that’s not a great way to pull cash flows from a portfolio anyway. But I was talking to Harold and asking him about, “How do you do it with your clients, given that yields don’t support a livable income stream and so forth?” And he said, “I just use this cash bucket that covers a couple of years’ worth of portfolio withdrawals. And then I manage a total return portfolio with that cash bucket bolted on.” And his basic finding in working with clients was that having the cash to pull from for their living expenses, especially during some sort of a down-market environment, just gave them a ton of peace of mind with the plan. They were less inclined to micromanage what he was doing with the long-term portfolio because they knew that their near-term cash flow needs were set aside in that cash position. And he also noted that it just gave them peace of mind to plan things; that they knew they could still take their family on the cruise that they had been planning next year, even if the market was down.
So, I’m listening to him and I’m thinking, well, if someone like this who really studies the investment piece of this, also finds that this is behaviorally sound, this seems like the kind of thing we should be talking about. So, I became an avid proponent of the bucket approach. I found in many years in talking to groups of retirees that it really resonates with them as something that’s really intuitive, that it’s a way to think about structuring an in-retirement portfolio to support your cash flows. So, the typical bucket structure that I use is a three-bucket structure where you have a couple of years of portfolio withdrawals in cash and then maybe another five to eight years’ worth of portfolio withdrawals in high-quality fixed-income investments, and then the rest of the portfolio can go into equities. So, with those first two buckets, you’ve built yourself something like seven to 10 years’ worth of portfolio cash flows in relatively safe investments. They’re not going to go down and stay down for 10 years. If that bucket too hits trouble, it probably might have a little bit of a hiccup, but it might recover within a few years. So that’s the basic idea in play with the bucket structure.
In terms of the pushback, it’s interesting. I was hearing a lot more pushback prior to 2022, especially the main reservation about this bucket system is that holding cash as an ongoing component of the portfolio, well it’ll drag on the portfolio’s return, right? There’s an opportunity cost. But it seems like 2022 shut everyone up on that front, where when stocks and bonds declined at the same time, having that liquidity bucket, I think, just made a world of sense. And of course, 2022 was a pretty unusual market, but I have heard fewer complaints about the bucket strategy and about the opportunity cost associated with that cash bucket in particular since 2022.
Arnott: You mentioned there has been some pushback about the whole bucket approach. And there was an article that Rob Berger wrote in Forbes where he called the bucket strategy fundamentally flawed. And his argument, I think, is that you really only need one diversified portfolio where you still have exposure to a variety of different asset classes, including stocks, intermediate-term Treasuries, and maybe cash. But you’re not necessarily dividing things into three buckets, but instead you are looking at which asset class performed best in a given year and then pulling withdrawals from that area. So how do you respond to that type of criticism?
Benz: Yeah, I see it. And I think Rob makes some valuable contributions. He is part of our Bogleheads community, and he does some great work. And to be honest, Harold Evensky really reaches the same conclusion as well that his thought was cash plus this diversified portfolio. Any more buckets than that, you’re probably getting a little carried away. The reason I like to at least use three buckets as an illustration tool is that I think it does help illustrate the logic of, here’s why we are setting aside X percentage of the portfolio in safer assets. And we’re stair-stepping that component of the portfolio by risk level. So, your first line reserves would be your cash. Your next line reserves would then be on into bucket two where perhaps you would want to sell short-term bonds if your cash bucket were exhausted. But I just find it to be a helpful illustrative educational tool more than anything else. I feel like it’s a good way to understand asset allocation, which otherwise can seem terribly black boxy. And I would also say, Amy, I think sometimes people do have the misconception that you need to have separate accounts for each of these buckets or something like that. No, that’s really just a way for understanding the accounts that you have in your portfolio.
Lefkovitz: You’ve also talked about a fourth bucket to cover potential costs for long-term care. Can you talk about that?
Benz: So, I was just saying, don’t get carried away with too many buckets. And I do like the idea of perhaps a fourth bucket where you have your, “I don’t know what’s going to happen” bucket, which is how I would see that fourth bucket where if you have uninsured long-term-care expenses, or if you live to be 105, or perhaps it’s your bequest bucket. And so, the idea is if you have outlays that you may need to address later in life, but you don’t know specifically how your life will play out, that’s the virtue of having that siloed fourth bucket that’s effectively segregated from your spendable portfolio. To me, there’s just a healthy mental accounting thing there that could provide someone some peace of mind if they have that silo of assets, and the idea is while this is for this, this, or this use later in my life, and I’m not going to touch it during my own lifetime, or I will only touch it in a worst-case scenario—I think it’s just an attractive way to mentally frame up how you’re using each component of the portfolio.
Arnott: We also wanted to talk about some other aspects of retirement planning, including decisions around housing and lifestyle. And on the housing side, Mark Miller makes the point that an overwhelming majority of people really want to age in place, but that doesn’t necessarily have to mean staying in your own house. How should people be thinking about this issue?
Benz: I could talk to Mark all day about many different things, but I loved the conversation that he and I had about housing. Mark does cover housing-related issues for older adults and his work for Morningstar and at other outlets that he works for. He does make the point that—I think he even uses a definition from someone, maybe AARP, that aging in place doesn’t have to mean staying put in the same house. And his point is—and I think many of us have experiences with older adults in our lives—that the home where you raised your kids, you might have some sentimental attachment to it, staying put is definitely the path of least resistance where you’re not having to uproot yourself. But his point is that it’s a lot about finding the right community, finding where you have those relationships, finding where your healthcare relationships are, finding where the cultural activities that you’re aligned with are. And then it might mean moving to a more sensible house that better suits your lifestyle, that’s better suited to aging.
One point that came through, I think, poignantly in that discussion with Mark, is just that as human beings, we tend to just think that the version of ourselves that we have today is how it will always be. And I think that’s a little bit of a trap that older adults can fall into, where they don’t plan ahead and don’t think about how their retirements—how they may change throughout their retirements and some of the decisions that they will need to make along the way. And I do think that while it’s fresh, if you have gone through the experience of dealing with your aging parents or your in-laws to try to use those experiences to inform how you want to do it, to try to make sure that you make it better than your parents or your in-laws or your other close relations did in their older years. So, I loved that discussion with Mark. I feel like housing in retirement, housing as we age, is pretty underdiscussed. And a point that I think Michael Finke made on this topic is just, you don’t necessarily want to put your kids in this position of making these decisions for you. Get ahead of it, articulate what you want, and be really proactive about addressing changes that need to be made rather than relying on your kids to make these decisions for you.
Lefkovitz: Fritz Gilbert in your discussion with him really offers a practical framework for preparing for retirement, like what steps you’re supposed to take five years out, four, and so on. Do you think that that sort of checklist approach can be helpful?
Benz: I love it. That was why I wanted to include Fritz in the book, because I love that checklist. He’s got a series on his Retirement Manifesto website, but it approaches it on a five-years countdown basis, which I think is such a neat way to approach it. He is incredibly methodical and also broad ranging. So, he talks about like home considerations, like we were just discussing, but also Social Security, long-term care, actually decoupling from your employer and making sure that you get things off your work laptop that you might want, whether photos or work contacts. So, he is just incredibly practical and specific.
And the other thing I loved about that discussion, Dan, is that we had a chance to talk about Fritz’s passion project, which is this charity that he and his wife started, where they’re building fences for dogs who would otherwise be on chains in their yards. And Fritz and his wife are animal lovers and moved to rural Georgia, where they saw a lot of these dogs on chains. And the great thing about—the reason I wanted to showcase that example was that I think it ticks so many boxes, that project of what constitutes a successful retirement. So, they’re doing this thing that they really believe in, that they feel is doing good in the world. But it’s also meant that they have this built-in social network in this community that they moved to. So, these people they hang out with, that’s I think their main friend network, they’re outside doing physical activity. So, so many things that we know contribute to successful aging, that project of theirs contributes to. And I also love that it’s not like this massive, overly ambitious project. It’s this thing that’s kind of manageable, like, oh, there’s a dog over here that lives in its yard on a chain. How can we help with that? And I just love that whole illustration. I think it’s a good way to get ourselves thinking about, well, what are the things that I could work on that would be along those same lines?
Lefkovitz: Purpose.
Benz: Exactly.
Arnott: In your discussion with Jamie Hopkins, he talks about the value of gradually transitioning into retirement. But it seems like in practice, most people work full time for up until their 60s, and then full stop, they shift into retirement. Do you think employers should be doing more to make a gradual shift possible?
Benz: I do. And I think we’ll see more of that, Amy, especially, I think we still have a pretty tight workforce. I think there will be more accommodations for older adults. I do think that the trend toward remote work, either, partial or full-time remote work, is a really benevolent trend for older adults where, yeah, you might want some flexibility in terms of where you live. As you age, you may not want to live in that place that’s super snowy and cold in the winter anymore. So, I do think that we’re going to gradually be seeing more of this. But I do think that there is kind of a bifurcation where knowledge workers, higher-income, better-educated knowledge workers seem to have more clout in their workplaces in terms of engineering those types of work arrangements. I’d like to see it get a little bit more equitable, and I’m not sure how we get there. But I do think that the trend is real.
I would also say it’s interesting. I’m very enthused about the topic of phased retirement and taking the best parts of your job and leaving the things you didn’t love as much. But I do think that I’ve never, in my conversations with older adults who are retired, no one really regrets having retired altogether. So, retirees by and large are a pretty happy lot. So far be it for me to suggest that everyone should phase into retirement. I’m not sure that’s necessarily the right answer. There are plenty of people who did the hard stop who seem plenty happy with that choice.
Lefkovitz: Another interesting point that came out of your discussion with Jamie Hopkins is that there are a lot of automated, systematized ways that we handle saving for retirement. But when you shift into retirement, there are a lot of things you have to do manually: rollovers, and RMDs and deciding when to take Social Security. Is that maybe an opportunity for the investment industry, the advice industry to help retirees automate the things that they need to do?
Benz: 100%. And in conversations that I’ve had with asset managers in particular, it seems like there is a lot of awareness of the importance of helping people at this life stage. There’s so much that’s suboptimal about the way that we do it now, where it’s like, yeah, as Jamie said, you have a ton of guardrails while you’re in the accumulation phase. Many people still do come up short with less than they should have for retirement. But there are a lot of things to help you get on the right path. But this idea of saying to a 65-year-old, “OK, here’s your money, go figure it out,” which is basically what we do now, there’s a lot lacking in the current system that we have. So, in terms of the perfect solution, I don’t know that we’ve seen it yet. I had been very convinced that it should be something that should be productized in some way. But now I’m thinking it’s probably more like a really great service that helps people with all of the key touch points that they need to address in their financial lives. But we need to make it simpler for people. It can’t be the answer that everyone needs to go out and hire an advisor. And while I love financial advisors, and I think they’re wonderful for people who can afford a good advisor, not everyone can. If we can find the target-data equivalent for retirement decumulation, I think that’s the holy grail. And I think asset managers would agree with that.
Arnott: When we interview people for the podcast, we often hear about retirees who have been such disciplined savers over their entire working lives that they’re afraid to shift into spending mode. What kind of advice would you give someone like that to give them permission to spend?
Benz: I think this is such a huge topic, Amy. You and I have discussed it. We’ve discussed it on our team as well. I think I’m going to be one of these people who will be very reticent to spend from my portfolio anything that’s rational. Because, speaking of identities—as we were before about our careers, you also come to identify yourself as like, oh, I’m a disciplined saving person. I’m an investor. I can imagine that it feels very uncomfortable to see your balance go down at all. So, I think there’s a huge mental hurdle to be jumped over.
One thing that I think might help is reframing it. Sometimes we talk a lot about retirement spending. But to me, I think that that unnecessarily conjures up images of going out to dinner every night or buying a new car every year, like frivolous spending that you don’t need to do. When in fact, spending can encompass giving to your loved ones during your lifetime. So, when your kids are in their 20s and 30s versus when they’re in their 50s and 60s, those early life gifts can be so much more impactful than the amount that they might inherit from you after death. So, I think as we think about retirement planning, reframing spending in some fashion to make it a little less negative seeming for these thrifty folks.
And then in terms of tangible ideas, I’ve written about this, I do think that an annuity, a very basic sort of income annuity that’s paying you a stream of income for perhaps the rest of your life can be really attractive as a way to overcome this hurdle, simply because it’s just a one-time thing that you don’t have to constantly, every month or every year, be tapping your portfolio for that paycheck. So, I think the extent to which you can remove the frictions for yourself in terms of the retirement spending, to me that redounds to the benefit of the plan that can help you, I think, probably spend an appropriate amount. But getting yourself over that main hurdle to purchase the annuity is probably a bit of a hurdle in and of itself.
Lefkovitz: Christine, healthcare is obviously a huge topic in retirement. You interviewed Carolyn McClanahan. What were some of your main takeaways from that discussion?
Benz: I love Carolyn. She is one of my favorite thought leaders. She is a financial planner who is also an MD. So, I think that’s a very unique combination. That’s why she is always out on the circuit speaking to financial advisors about what they should be thinking about. Some of the key takeaways from that discussion were that it’s not too late to improve, that even modest lifestyle adjustments for people who maybe have been inattentive to their health up until this point, even if they’re in their 60s, you can still make improvements that will redound to the benefit of your quality of life and your longevity. So, I thought that was a helpful discussion, hopeful discussion. We did talk about the shortage of general care practitioners in the healthcare world, especially gerontologists. Caroline flagged that that’s really a place where people, she works with, have trouble finding good quality care, finding caregivers who are experienced with dealing with the specific concerns of older adults. She also, in her writing and in her speeches, often talks about how our healthcare system is very much geared toward overconsuming healthcare that we need to put in place some breaks to make sure that we are consuming healthcare in line with our wishes, certainly in line with our finances. So, she discusses some different aspects of that. She notes that it’s something we really need to fight against because the healthcare system is very much geared toward just delivering whatever care regardless of whether it’s necessarily appropriate at a given life stage. And of course, that’s a huge generalization.
But some really valuable takeaways in that section also about long-term care because Caroline really covered the waterfront of healthcare. She did talk about finding caregivers, the caregiver shortage, people receiving care in their home and the various considerations around that. This gets back to my family story about my point on this topic is always just like, if your plan is to have care in your home, if you should need it, just make sure that you have a very engaged adult child who is standing by ready to help see that thing through because there is a lot to that. It’s not as simple as hiring the caregivers, hiring a house cleaner. You need someone who is really overseeing the whole thing. So, it was a really broad-ranging discussion. I always learn a ton from her.
Arnott: You also talked to Cameron Huddleston about communicating with loved ones about money, which is a really important and difficult topic. Why do you think money is such a taboo topic in a lot of families? And how can people broach topics that might be hard to think about or talk about with their aging parents or other relatives?
Benz: I love this section with Cameron because she brought her own personal experience to bear on her life’s work, which is about families communicating on these matters. She lost both of her parents at a fairly young age and was left grappling with picking up the pieces. Her mom had dementia, her dad died—her parents were divorced—and dad died suddenly unexpectedly at a fairly young age. And so, she was left to grapple with that.
In terms of why it’s so taboo, Amy, I do think that potentially we’re seeing some change there. I think it’s maybe generational, where in my generation, it was not something that we talked about in our family. My parents, as they aged, and I became their financial partner, they brought me on board. But I’m not sure that it was particularly common in my generation, certainly not in their generation to share with adult children.
My sense is that younger parents are maybe a little bit more receptive to speaking with their kids about their finances. I think part of the good way to get the discussion started in families is just to share information. So, for adult children who are sitting there wondering, what do my parents have? Do they have an estate plan? Do they even have a will? A great way to get that discussion started is to come to them and say, hey, my spouse and I are thinking about getting an estate plan. We recognize we need a will, and we need guardianships for our kids. What did you and mom do? And that’s I think your way in to do some fact finding and to get that conversation started. But it’s definitely not an easy one. I would say from my own perspective, just starting younger when it’s still a little bit of an abstraction for you in terms of your mortality and your passing on, that makes it easier than I wouldn’t want to necessarily come to my 91-year-old mother-in-law today, for example, and start grilling her about her estate plan. It’s not a happy topic for her. But when you’re in your 40s and 50s, it’s still a little bit more in the abstract zone. I think it’s easier to talk about.
Lefkovitz: Well, your conversation with Jennifer Rozelle on estate planning, there’s a great bit on beneficiary designations, sort of a blind spot. Can you talk about that and any other blind spots common in estate planning?
Benz: I loved that conversation with Jenny because she talks about a lot of different dimensions of estate planning. She is a practitioner and attorney. But that beneficiary designations thing, Dan, I think is super interesting. People underrate them. You might just scratch them out when you’re making your 401(k) allocations or something. You don’t give them a lot of thought. You might not update them as your circumstances change. So, the commonly given example is the person who got divorced and the spouse is still their beneficiary. Well, guess what? If you didn’t change it, the ex-spouse is going to be the beneficiary. So, even if you lay all the groundwork for the rest of the estate plan, so you’ve got a will and you’ve got trusts and so forth, if the beneficiary designation says something else, it will generally take priority. So, I think that’s an important wake-up call to just revisit those beneficiary designations regularly. If you’re doing some sort of portfolio update, just consider it part of your portfolio hygiene where you check up on that stuff. Incidentally, the beneficiary designations can also drop off if you change providers or if your company changes providers. Sometimes the old beneficiary designations won’t automatically come over to the new account, so you’d want to check that as well. That was one key thing.
She also just discusses the importance of powers of attorney for healthcare matters and for financial matters. The terminology is a little funky. It varies by state, but it’s important to designate these people to act on our behalf during our lifetimes if for whatever reason we’re unable to make our own decisions for ourselves. So, she hits the importance of powers of attorney and also who to select, that these are not honorary designations. You want it to be the person who literally is best situated to make these decisions for you. She shares some helpful guidance on how to take the measure of individuals in your own life when you’re making these beneficiary designations.
Arnott: The very last chapter of the book is your interview with Jordan Grumet, who now works part-time as a hospice doctor. It might seem like talking about hospice care and death could be a very depressing topic, but I thought this chapter was really inspiring and hopeful. What were some of your key takeaways from what he said about minimizing regrets, conducting a life review, and finding a life purpose?
Benz: Yeah, I told my husband that we’re going to make Jordan the last chapter of the book. He was like, a hospice doctor, the last chapter, are you sure? I told him that if he read it, he would be on the same page with me, that it was a good thing to end with. The main takeaway from me, from Jordan’s words there, I talked about the Big P and Little P purpose, but also this idea of trying stuff, that the main thing people regret at the end of their lives is stuff that they wanted to do but didn’t try. It’s not that they tried and failed. So, Jordan talks about this individual who he saw when he was dying, and he was a young man, I think, in his 40s. The pinnacle of his lifetime was having tried to climb, I think it was Mount Everest, and he didn’t actually succeed, but this crowning achievement for him was that he did this. He had this experience, and so he would regale all the people in the healthcare setting about his adventures.
The takeaway there really is just try things and use this chapter of your life. You’re not on your deathbed, so use these years as a time to try to explore some things that you, in hindsight, might wish you had done. We talked a little bit about how for a lot of people, they might have relationships that had not played out perhaps the way that they had hoped. He talked about how it’s not too late to just dip a toe into, can this relationship be repaired? Because oftentimes that is something people regret—that they had a loved one at one point very involved in their life and then have that relationship be severed somehow to just try to re-engage with that person while you still can. So, I came away from that chapter, that whole discussion, very, very hopeful as well, Amy. I feel like it just does provide ideas and impetus to make sure that you are thinking forward about your purpose and making sure that you don’t have those regrets in the end.
Lefkovitz: Well, Christine, as a final question, wondering if we could ask something a little personal, which is how you’re thinking about your own retirement. You seem very youthful, but you have been at Morningstar for over 30 years. I’m just curious if the practice of writing this book maybe got you thinking and maybe changed your perspective?
Benz: Definitely. So, Amy and I interviewed Scott Rick a few months ago. He is a professor at University of Michigan, and he used this term, “me-search.” I think there’s a little bit of that in this project, a little bit of me-search going on here where I was like, oh, I have all these questions and so do my peers. So, it’s working out well here that I’m able to focus on this a little bit.
In terms of my own retirement, I am very much thinking about a phased retirement. I remember talking to Carl Richards, the financial advisor and behavioral finance guru about—he mentioned this idea of a “stop-doing pile.” Like if you have parts of your work life that you are really not into anymore, try to take a mental note of what they are and try to shed those. That it’s sort of like mastering the art of subtraction, that getting rid of things you really don’t enjoy is part of succeeding. And that has informed my thinking about phased retirement. I’m trying to sort of stealth shed things that I don’t love doing as much and embrace things that I like doing more. So, this podcast has always been on my “keep doing” list. This book project was very much on my “want to do” list.
And so, I’m trying to reframe my work life to be more in line with the things that at the end of each day, I want to be like, that was a really good work day. I want every day to be like that. And I suppose at some point I may scale back my hours a little bit. But segueing into being a full-time remote worker has been helpful in terms of getting me moving in that general direction where I feel like I have a little better work/life balance than I had before. So, making some moves around the margins, but definitely thinking that I’ll phase in. I’ll probably be someone who will be doing some version of my life’s work for at least several years, because I just realize what a privilege it is to be able to do something that I think is helpful to people and to have that be my occupation just seems like just a really wonderful blend. And so, I feel very, very lucky.
Arnott: Well, I know you’ve had a huge impact on so many people who have listened to your podcast over the years and read all of your articles, and it’s just an amazing body of work.
Benz: Well, thanks to you both. I’ve really loved talking to you. It’s just a little weird sitting here on the other side of the table, but it’s been a lot of fun.
Lefkovitz: Thanks so much, Christine. The book will undoubtedly help a lot of people out there.
Benz: Thank you both so much.
Lefkovitz: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.
You can follow us on socials at Dan Lefkovitz on LinkedIn.
Arnott: And at Amy Arnott on LinkedIn.
Benz: And @Christine_Benz on X or Christine Benz on LinkedIn.
Lefkovitz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.
Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com . Until next time, thanks for joining us.
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