#1: An Easy Way to Create a Lifetime Income Stream

In today's episode, I discuss with my guest, Don Ezra, how individuals can create a lifetime income stream from their wealth as they reach retirement and how sponsors of defined contribution plans could use this method to help their retiring plan participants do the same.

While we often overlook this topic when we're younger, the closer we get to retirement age, it becomes much more interesting. And for many of us, challenging. That's why I put together this episode.

Don Ezra is not only a former colleague of mine from our days at Russell Investments, but also a legend in the pension world.

His industry recognitions include being awarded the Lillywhite Award (from the Employee Benefits Research Institute, 2004) for extraordinary lifetime contributions to Americans' economic security, the Graham and Dodd Scroll Award (from the Financial Analysts Journal, 1985) recognizing excellence in financial writing, and the Roger Murray Prize (from the Q Group, 1983) for excellence in quantitative research in finance. (View Don’s entire background here.)

This is a special episode for me because reconnecting with Don takes me back to a time when he and I worked together at Russell Investments back in the early 2000s. That was a time when DC plans were overtaking DB plans in terms of participant count and assets.

Back then, it was becoming clear to all of us that the future pension for individuals in America would come in the form of essentially a 401(k) or some other defined contribution-type account. That was a scary prospect- still is today in many ways- because we were taking most of the risks inherent in creating a secure retirement and handing them to the individual and wishing them luck.

The topic of this episode, which is essentially how to make your retirement funds last as long as you do, is one of the challenges that DB plans used to handle for us but now has been transferred to individuals.

This trend from DB to DC caused many of us to start thinking about how to DB-ize DC plans. This is how Don and I came to work more closely together. He knew pensions as well as anyone in the world, and I had responsibility for Russell's DC business at the time in the US. So, we collaborated on projects and presentations. And he was always gracious and patient sharing his thoughts with me about DB-ization of defined contribution plans.

Some of the topics we discuss in this episode include the following:

·     Why a default solution for creating a lifetime income stream need not be perfect,

·     What people typically do with their accumulated wealth at retirement, and why it is sub-optimal,

·     Why creating a lifetime income stream is such a tricky problem to solve,

·     Overview of the five methods for creating a lifetime income stream,

·     Which method makes a simple and effective default method for defined contribution plans and individuals,

·     Thoughts on customizing a lifetime income stream,

·     And more

Links and Contact Information

·     Read Don’s blog post that inspired this episode

·     Don Ezra’s blog

·     Read more about Don Ezra here

Disclosures and Disclaimers

·     Nothing in this episode is intended to be, or is, financial or legal advice,

·     Statements and opinions expressed by those interviewed for this episode do not necessarily reflect those of the host, Matt Smith, and

·     The content in this episode is not a paid promotion.

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