10 Can't-Miss Retirement Podcast Episodes From 2023

2. It’s Time to Drop Fixed Withdrawal Rules

Another must-listen episode of the Economics Matters podcast also dropped in July, featuring Kotlikoff and the well-known retirement income researcher Wade Pfau.

In general, even savvy financial planners struggle to fully understand and accurately contextualize Monte Carlo simulations, Pfau said, of which the 4% “safe withdrawal” rule is perhaps the most famous and widely cited example.

According to Pfau, the topic of poorly contextualized Monte Carlo might sound like overly academic or esoteric matter, but it’s actually of paramount practical importance.

What is critical to understand is that this type of modeling is highly sensitive to the inputs and assumptions being used, Pfau warned. Monte Carlo simulations, with their focus on generating binary success-failure probabilities, can mask a lot of nuance in middle-ground cases where success and failure are harder to define, “such that we have to view all retirement simulations with a significant degree of caution.”