Most important research paper in Financial planning this year

PLEASE READ Wade Pfau’s (one of the respected voices in retirement planning, his books are a must read and he heads the retirement planning program at the American College of Financial Planning) research paper on the Monte Carlo simulation fallacy. As retirement planners, we tend to gravitate towards comprehensive financial planning software such as MoneyGuide Pro, EMoney and their ilk.

All of these financial/retirement planning software packages rely on Monte Carlo simulations to arrive at a “safe”withdrawal rate from client’s portfolios. All of you are familiar with Bill Bengen, a San Diego, CA financial planner and his 4% Rule. This research paper is a repudiation of that rule. . One of our clients prime retirement planning concerns is the question, “ How much can I safely withdraw from my portfolio with very high confidence for my lifetime?”. Monte Carlo simulations as used in the financial services arena have been mathematically proven to be of no use. Why?(You must read to find out). What now??? Retirement planning is dead??

The answer as Darren Sugiyama would say is “mathematically indisputable and brutally honest”.

ANNUITIES- this is the answer that the most respected voices in the financial planning industry have now endorsed.

Using annuities in retirement planning distribution plans is truly fulfilling your fiduciary obligation.

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