Investments/retirement professor & Frank M. Engle Chair of Economic Security at The American College. Contributing Editor, Investment Advisor Magazine.
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Articles by Michael Finke
Social Security Fixes: The Bad and the Ugly
In 2032, Social Security payments to all beneficiaries will be cut by 22%, according to the newest Trustees Report. Because of the shrinking ratio of workers to retirees, we simply can't pay the benefits we've promised unless we either raise taxes or reduce benefits.
Exploring the Retirement Risk Zone
ThinkAdvisor provides financial advisors, registered investment advisors and wealth managers with comprehensive coverage of the products, services and information they need to guide their clients in making critical wealth, health and life decisions.
Are Passive Funds Getting Dangerous?
ThinkAdvisor provides financial advisors, registered investment advisors and wealth managers with comprehensive coverage of the products, services and information they need to guide their clients in making critical wealth, health and life decisions.
Is Delayed Retirement Bad for Your Health?
ThinkAdvisor provides financial advisors, registered investment advisors and wealth managers with comprehensive coverage of the products, services and information they need to guide their clients in making critical wealth, health and life decisions.
Using Bond Ladders to Create a Personal Pension Is Getting Easier
Retirees who see fixed lifestyle costs as a future liability will need to allocate a portion of their portfolio to less risky assets that can be liquidated. • With a Treasury bond ladder, retirees know exactly how much they’ll need to set aside to fund that liability. • An inflation-protected annuity could allow a retiree to set aside less money to fund basic expenses.
Most Retirees Want to Front-Load Their Spending
What is the temporary “senior deduction” deduction for taxpayers age 65 and over? What is the temporary deduction for auto loan interest? What is the temporary deduction for overtime income? What is the temporary deduction for tip income? What is a high deductible health plan for purposes of an HSA? Are remote workers eligible for leave under the Family and Medical Leave Act (FMLA)?
Suze Orman Gets It Wrong on Annuities and Taxes
Immediate Answers to Critical Tax Questions At Your Fingertips Keep up with the latest tax rules and regulations with weekly, exclusive updates by our Tax Facts experts. Get More Information Recently Added Q&As Recently Updated Q&As What is the temporary “senior deduction” deduction for taxpayers age 65 and over? Get Answer Recently Updated Q&As What is the temporary deduction for auto loan interest? Get Answer Recently Updated Q&As What is the temporary deduction for overtime income?
A Surprisingly Powerful Motivator to Plan for Retirement
Recently Updated Q&As What is a high deductible health plan for purposes of an HSA? Get Answer Recently Updated Q&As Are remote workers eligible for leave under the Family and Medical Leave Act (FMLA)? Get Answer Recently Updated Q&As Is the value of employer-provided coverage under accident or health insurance taxable income to an employee when the coverage is provided for the employee’s spouse, children or dependents?
A Surprisingly Powerful Motivator to Plan for Retirement
Immediate Answers to Critical Tax Questions At Your Fingertips Keep up with the latest tax rules and regulations with weekly, exclusive updates by our Tax Facts experts. Get More Information Recently Added Q&As Recently Updated Q&As What is a high deductible health plan for purposes of an HSA? Get Answer Recently Updated Q&As Are remote workers eligible for leave under the Family and Medical Leave Act (FMLA)?
Why Advisors Should Never Recommend Social Security Claiming at 62
Immediate Answers to Critical Tax Questions At Your Fingertips Keep up with the latest tax rules and regulations with weekly, exclusive updates by our Tax Facts experts. Get More Information Recently Added Q&As Recently Updated Q&As What is a high deductible health plan for purposes of an HSA? Get Answer Recently Updated Q&As Are remote workers eligible for leave under the Family and Medical Leave Act (FMLA)?
Sylph Editions | C40 Flight
Deskbound and myopic, ever since his childhood author Michael Finke has dreamt of flight. After decades as a university professor whose secret vice was to spend weekends soaring in light planes and gliders, he came across little-studied writings of leading Russian authors of the 1920s who, at the direction of Soviet authorities, engaged aviation as a signal promise of progress in Bolshevik Russia – another dream asking to be translated into reality.
Freedom To Spend
Changing how our clients understand lifetime income Michael Finke, Ph.D., CFP® is IncomePath’s Chief Strategist and is also a professor and Frank M. Engle Chair of Economic Security at The American College of Financial Services. There, he leads the Granum Center for Financial Security and is known nationally for his thought leadership on retirement income planning, retirement planning, life satisfaction, and cognitive aging.
Which Strategy Wins the Retirement Spending 'Smackdown'?
What You Need to Know Different approaches stand out for different reasons, experts agree, but flexibility is key. Some methods are easier to understand, but they are often more rigid and hard to follow in practice. Researchers David Blanchett and Michael Finke prefer responsiveness and more guarantees. Retirement income planning has moved far beyond the traditional 4% withdrawal rule.
Want to Double Spending in Retirement? Annuities Can Help
What You Need to Know At the heart of the analysis is the fundamental tradeoff that unknown longevity presents. The mental transition to decumulation means that retirees without guarantees can significantly underspend. Additional research should explore some of the explanations for conserving wealth in retirement, Michael Finke and David Blanchett suggest.
Giving Retirees the Freedom to Spend
Most clients have no idea what retirement failure means to them and how a given failure rate should influence their planning. We present a planning framework that improves on existing models by dynamically adjusting for market performance and longevity. Research shows the most popular reason people seek professional advice is to understand how much they can safely spend in retirement. How much can a retiree spend each year without running out?
Rethinking Lifespan And Lifestyle
How to throw out a concrete planning horizon to better handle longevity Michael Finke, Ph.D., CFP® is IncomePath’s Chief Strategist and is also a professor and Frank M. Engle Chair of Economic Security at The American College of Financial Services. He leads the Granum Center for Financial Security.
Supernerds: Ramsey’s Been Wrong on Retirement Income for a Decade, but It Matters More Today
Sequence of Returns Risk Is Fundamental While it can be a challenging topic to teach clients, the researchers agreed, the issue of sequence of returns risk is incredibly important (and potentially powerful) in the planning effort.
Repeal Income Tax on Social Security? What Retirement Experts Think of New Bill
What You Need to Know The You Earned It, You Keep It Act would end federal income tax on Social Security benefits while phasing out the payroll tax cap. Retirement planning experts say the fundamentals of the proposal are sound but a broader approach may ultimately be needed. While passage in the short term appears unlikely, the legislation could serve as a stepping stone in future Congresses.
Repeal Income Tax on Social Security? What Retirement Experts Think of New Bill
Unlikely to Pass, at Least in This Congress As for the You Earned It, You Keep It Act’s chances for passage in the near term, Emerson Sprick, the associate director for economic policy at the Bipartisan Policy Center, says the current makeup of the House and the fact that it’s an election year make it pretty unlikely. He says the same is true for Rep. John Larson’s Social Security 2100 bill.
Is Underspending a Fiduciary Problem?
There is debate about whether fees or commissions lead to better outcomes for retirement savers. But one aspect that hasn’t been discussed enough is that the loss of welfare from underspending is likely much higher than from choosing one or the other fee method. Unspent savings is an ignored fiduciary problem. In his amazing book on retirement-income analysis, Bill Sharpe evaluates retirement spending strategies using a pie chart that shows how big a slice goes to spending, bequests, and fees.
Can Ken Fisher Have It All?
What You Need to Know The RIA famously argues that anything that can be done with annuities can be done better with other investment products. From an academic perspective, total refusal to recommend an annuity is not in the best interest of retirees. While consumers are benefiting overall from the shift to fee-based compensation, it does create conflicts of its own. Ken Fisher has mounted one of the most successful attacks on a single financial product in history.
Ken Fisher Can't Have It All
Can a fiduciary liquidate an annuity for an IRR above what an advisor could construct from a bond ladder net of fees to a client’s average expected longevity? This isn’t an esoteric question. Many advisors would liquidate the annuity. Rationales could include the possibility that $50,000 invested in stocks might outperform net of fees, or that the retiree bears some risk that the insurer could default.
Supernerds Unite Against Dave Ramsey’s 8% Safe Withdrawal Rate Guidance
Dave Ramsey is not a fan of safe withdrawal rate researchers. In a recent podcast episode, he blasted them for being “supernerds” who “live in their mother’s basement with a calculator.” When told about these quotes, one of our spouses (who knows all three of us well) replied “well, you don’t live in your mother’s basement.” Ramsey’s math is simple.
Understanding Annuity Mortality Credits
This paper examines how retirees can spend more money each year in retirement by pooling the risk of an unknown lifespan with other retirees through an annuity – a benefit that is often described as a mortality credit. Obtaining mortality credits through the purchase of an annuity allows retirees to improve their lifestyle and worry less about the risk of outliving savings.
Is an Inverted Yield Curve Bad News for Stocks?
Historical equity returns have been significantly lower in one-year periods when bill yields exceed bond yields. Pivoting from bonds and equities into bills when the yield curve inverts has been a smart play historically, but investors need to be ready to move back when it normalizes. This doesn’t necessarily mean that stocks shouldn’t be part of a portfolio when the yield curve is inverted.
T-Bills vs. Treasury Bonds: Which Should You Pick When the Yield Curve Inverts?
The current Treasury yield curve is deeply inverted. This forces investors to choose between earning a higher rate for a year or locking in the highest 10-year rates since 2007. Historically, pivoting to bills when yield curves are inverted has paid off, but only if investors move back into bonds when the yield curve normalizes. The current Treasury yield curve is deeply inverted, offering 5.4% for one-year T-bills and just 4.3% for 10-year Treasury bonds.
T-Bills vs. Treasury Bonds: Which Should You Pick When the Yield Curve Inverts?
The current Treasury yield curve is deeply inverted. This forces investors to choose between earning a higher rate for a year or locking in the highest 10-year rates since 2007. Historically, pivoting to bills when yield curves are inverted has paid off, but only if investors move back into bonds when the yield curve normalizes. The current Treasury yield curve is deeply inverted, offering 5.4% for one-year T-bills and just 4.3% for 10-year Treasury bonds.
Peter Attia and Outlive: The Importance of Investing in Our Health
A diligent worker who invests for retirement will effectively lose the value of the dollars they’ve saved if they don’t also make an investment in their health. Imagine that you spend your working years planning for a retirement that includes hiking various mountains around the world. Vacations aren’t cheap, so you save and invest to afford nights and meals at a chalet, flights and a new pair of hiking boots. Hiking up a mountain at altitude requires a minimum level of physical ability.
Do U.S. Investors Underestimate Risk?
A common way to reassure clients that a worst-case scenario won’t ruin their financial plan is to show how investments recovered after the Great Depression, the tech bubble, or the global financial crisis. The U.S. stock market may stumble, but portfolios recover over the long run. But the U.S. is one country – and a country that avoided some serious bad luck that affected other countries during the 20th century. A 2020 paper for the Rodney L.
KINGFISH Will Play 2023 FRIGID Fringe Festival This Month
Kingfish by Lane McLeod Jackson is a wild ride combining dark humor, dueling egos, miracles, and even a shot at redemption. Tyler Riley directs and stars in this one-of-a-kind exploration of what defines "greatness" while playing the dry-witted and stubborn J.J. Williams (bass fisher extraordinaire). Across from him is playwright Lane McLeod Jackson, possessed by a devil unlike any you've seen - obnoxious, moody, and a little hungry. The two battle for glory and J.J.'s immortal soul...
Lauren Gunderson's EMILIE; LA MARQUISE DU CHATALET DEFENDS HER LIFE TONIGHT to Have NYC Premiere at The Flea
Duende Productions will present the New York Premiere of Emilie; La Marquise du Châtelet Defends Her Life Tonight by Lauren Gunderson (The Catastrophist with Marin Theatre Company; Natural Shocks with WP Theater), directed by Kathy Gail MacGowen (In The Summer Pavilion at 59E59; Kentucky Cantata at HERE) at The Flea Theater (20 Thomas Street New York, NY 10007), April 6-30. Emilie is one of History's most undertold stories.
Photos: Go Inside Rehearsals for THE HARDER THEY COME at the Public Theater
Pulitzer Prize-winning playwright and The Public's Writer-in-Residence, Suzan-Lori Parks, will bring to The Public a new musical adaptation of the 1972 movie, THE HARDER THEY COME. Get a first look inside rehearsals below! The production will begin performances in the Newman Theater with a Joseph Papp Free Performance on Thursday, February 16 and will run through Sunday, March 26, with an official opening on Wednesday, March 15.
Ensemble Studio Theatre Names Estefanía Fadul and Graeme Gillis New Co-Artistic Directors
Ensemble Studio Theatre has appointed Estefanía Fadul and Graeme Gillis the new Co-Artistic Directors of the 55-year-old award-winning off-Broadway theater company. Gillis, who has been serving as Interim Artistic Director since William Carden retired in 2022 and is a long-time member of EST, will begin planning the 2023/2024 season with director/producer Fadul who will officially join the prestigious company in March.
Will Clegg's SYNCOPE Will Premiere at the 2023 FRIGID Fringe Festival
Celebrated storyteller Will Clegg has been using (but not abusing) marijuana for almost 30 years. It was all fun and games until he started fainting and developed a serious panic disorder. Syncope is his hilarious and often poignant journey to finding balance in his life - physically, intellectually, and emotionally. This second solo show from two-time Moth Winner and prolific performer Will Clegg will receive its World Premiere at the historic FRIGID Fringe Festival in NYC.
Tor Hillhouse Joins The Cast of PERFECT CRIME Off-Broadway
Tor Hillhouse has joined the cast of Off-Broadway's PERFECT CRIME, by stepping into the role of Detective James Asher, stepping in for Michael Halling through February 19th. The production is approaching its milestone 36th Anniversary (April 18th) in the Anne Bernstein Theater at The Theater Center Theater Center (210 West 50th Street).
Tickets Now On Sale For POWERLINE ROAD, A New Musical By Michael Finke
Theatre Now has announced that tickets are now on sale for Powerline Road, a neo-noir synth-based pop musical by Michael Finke. Performances will run from March 17th to April 1st at the Jeffrey & Paula Gural Theatre at ART/NY, 502 W 53rd St. Tickets start at $25, with two performances that are pay-what-you-want, and are available for purchase at www.tnny.org or by calling 855-254-7469. Powerline Road follows four different stories of four Floridians over the course of 24 hours.
What Your Clients Don't Know About Longevity Could Hurt Their Retirement
What You Need to Know Most people don't know how long the average 60-year-old can expect to live. People with a better understanding of longevity save more for retirement. Advisory clients who understand longevity can set a more realistic retirement age and make better Social Security claiming decisions. Do you know how long an average 60-year-old American will live? Most people don’t.
The Year-End Planning Tip That Has Finance Profs Talking
What You Need to Know I asked my colleagues at The American College for year-end planning ideas, and they delivered. Tax loss harvesting was a topic on everyone's list. Another tip: Clients who turned 72 in 2022 should consider taking RMDs by year end, even if they can wait until April. What’s special about year-end planning in 2022? Harvesting equity losses isn’t novel, but this year advisors get to pick from a range of assets that fell at the same time as stocks — most notably long-term bonds.
how realistic are your retirement plans?
Many Americans who began saving for retirement when they joined the workforce likely had an idealized picture in mind of what retirement would be like when they got there. This includes what their lifestyle might look like, whether that meant moving closer to family, traveling or downsizing to a smaller home. However, with inflation reaching 40-year highs, and recession fears continuing to increase, many are wondering if a 'traditional' retirement is still realistic.
Is a Guaranteed Lifetime Withdrawal Benefit (GLWB) Worth It?
Imagine that you decided to retire at the end of 2021 and were planning on spending $25,000 each year from a $500,000 balanced portfolio of stocks and bonds. Before this year, you would have had about an 80% chance of being able to fund 30 years of income. Fast-forward to today, when your portfolio is down 20% or more, would you still feel comfortable spending $25,000?
The Real Value of Annuities for Mass Affluent Retirees
What You Need to Know A recent Morningstar study concluded that annuities add little value for investors who are well-prepared for retirement. The study looked at failure rates, or the probability of running out of retirement savings. But there's more to the story. Partial annuitization can free a retiree from the fear that a market drop or a long lifespan will leave them broke.
Save more with less: The impact of employer defaults and match rates on retirement saving
Abstract Employers control two primary levers that can motivate retirement savings among defined contribution plan participants—default savings rates and match rates. Setting a higher default savings rate can increase plan contributions among passive savers who accept the default. A higher match rate incentivizes active savers to increase contributions.
About That 5-Year Gender Longevity Gap …
What You Need to Know The gender life expectancy gap may be five years at birth, but it's a different story for your 65-year-old clients. The longevity gap between men and women is much less significant within higher-income households. Financial advisors should consider this shrinking longevity gap when advising clients on retirement and Social Security planning. A recent report from BlackRock highlights the five-year difference in lifespan between men and women.
Guaranteed Lifetime Income Isn’t Free
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives. Insurance protects against losses – fires, floods or a wrecked car. Because of the life-altering consequences, a client buys insurance to avoid the painful consequence of a random loss. In this article, we clarify the costs and the expected payouts from lifetime income insurance through a guaranteed lifetime withdrawal benefit (GLWB).
Forget What You Know about Stock Returns
Many advisors use historical data to project expected returns for U.S. stocks and bonds. But a close look at the historical data suggests that the excess performance of stocks relative to bonds occurred mainly in two historical periods and has been much less consistent over the last 25 years.
Annuity Payout Rates Are on the Move
What You Need to Know Multi-year guaranteed annuities (MYGAs) are a surprisingly appealing fixed income investment alternative. Gains are taxed only when the annuity is cashed in, providing a net tax benefit for many near-retirees. Variation in rates has spiked in the past few months, increasing the benefit of shopping around.
Downside Down: Why Advisors Shouldn't Dismiss Index-Linked Annuities
What You Need to Know Sales of protection-focused annuities, mainly RILAs, have outpaced sales of other annuity types. Advisors shouldn't dismiss investments that limit downside (and upside) as inefficient gimmicks. Annuity wrappers can be useful for deferring short-term gains until after retirement.
Does Advisor Channel Influence Passive Fund Choice?
Journal of Financial Planning: April 2022 Executive Summary Historical differences in compensation may influence how representatives from broker-dealers, registered investment advisers, and dual registrants select funds. Evidence from advertising content suggests that active-fund families promote characteristics such as recent returns that are appealing to investors and reward commission-compensated advisors, but do not predict future performance.
Why Social Security Claiming Really Counts for Wealthy Clients
What You Need to Know Strategic claiming can add $100,000 or more to an investor’s wealth that can be used either for income or legacy goals. Most retirees are able to increase their wealth through delayed claiming. Social Security should be considered part of the fixed income assets within a client’s investment portfolio; delayed claiming allows an advisor to increase stock allocations. A high-earning retiree with a $2.5 million investment portfolio holds 20% of their wealth in Social Security.
How to Craft 'Super Roths' for Wealthy Clients
Further, private placement life insurance may not provide the lowest level of insurance, according to Rembowski: “A lot of times COIs on private placement products are higher because private placement companies are using reinsurers instead of holding the insurance themselves. The primary reason to choose private placement is the investment choices. You have access to private alts and hedge funds — the ugliest of the tax stuff.
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