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A weekly reality check on sensible investing and financial decision-making for Canadians. Hosted by Benjamin Felix and Cameron Passmore.

Oct 29, 2020

There are seven equations that, if understood, will put you in the best possible position to tackle your retirement plan. Today we speak with business professor Moshe Milevsky about these equations, which he’s written extensively about in his best-selling book, The 7 Most Important Equations for Your Retirement. After introducing Moshe, we dive straight into the first equation that maps out the longevity of your money. Following this, we talk about determining how long you will live by comparing your biological and chronological ages. Regarding the third equation, Moshe provides his insights into evaluating the usefulness of an annuity plan, and at what age they become relevant to you. We then chat about what annuity plans are offered in Canada versus elsewhere and why people don’t want to buy annuities during a bull market. Despite the popularity of the ‘4% spending rule’ — which we also unpack — Moshe discusses the importance of being adaptable with your retirement spending rates. Reflecting on the key theme of another of his books, we explore the question of whether people are stocks or bonds. Moshe shares some investing advice for younger listeners and touches on what the ideal mix of stocks, bonds, and human capital looks like. For the last equation, we look into the impact of probability frameworks and why financial advisors need to understand the math behind retirement plan probabilities to make meaningful recommendations. Throughout our discussion, Moshe presents coherent answers and pragmatic advice. Tune in and learn more about the equations needed to build the best possible retirement plan.


Key Points From This Episode:

  • Introducing today’s guest, Professor Moshe Milevsky, and his work. [0:0:15]
  • Exploring Moshe’s book, The 7 Most Important Equations for Your Retirement. [0:02:57]
  • Mapping the longevity of your money according to Moshe’s ‘Fibonacci Equation.’ [0:03:25]
  • Determining how long you will live when planning your retirement funds. [0:04:37]
  • Understanding the difference between your biological and chronological age. [0:06:22]
  • A challenge to our retirement system; it’s based on chronological and not biological age. [0:08:45]
  • Introducing the concept of annuities and how they can be valued. [0:10:03]
  • Striking a balance with your annuity plan and answering — “How much is too much?” [0:11:42]
  • Moshe shares his thoughts on how much insurance companies factor in biological age. [0:14:04]
  • Ideas on using your biological age to your advantage. [0:15:35]
  • Why you probably shouldn’t even consider getting an annuity until you’re 60. [0:17:16]
  • Canadian annuity plans versus elsewhere; “The shelf feels empty here.” [0:18:30]
  • The correlation between being in a bull market and people not wanting annuities. [0:20:35]
  • Establishing your ideal retirement spending rates — flexibility is important. [0:25:25]
  • Unpacking the ‘4% rule’ and why it’s a ridiculous spending framework. [0:28:04]
  • What your mix between stocks, bonds, and human capital should be. [0:31:08]
  • Answering the question — are humans stocks or are they bonds? [0:33:28]
  • Leveraging youth to get quicker exposure and equity. [0:36:03]
  • Life insurance and measuring your financial legacy. [0:39:10]
  • Details on the life of Andrey Kolmogorov and his effect on understanding probability. [0:40:54]
  • How important probability frameworks and analysis are to retirement planning. [0:43:17]
  • The impact of low-cost index funds on retirement income planning. [0:45:18]
  • Keeping finance students engaged in the industry. [0:47:24]
  • How Moshe defines success, his other research interests, and reflections on the success of his books. [0:49:53]