Wade Pfau | CFA Institute

Personal Details

Bio

Wade D. Pfau, Ph.D., CFA, is a Professor of Retirement Income in the Ph.D. program for Financial and Retirement Planning at The American College in Bryn Mawr, PA. He also serves as a Principal and the Director of Retirement Research for McLean Asset Management and inStream Solutions. He is a past selectee for the InvestmentNews “Power 20” in 2013 and “40 Under 40” in 2014, the Investment Advisor 35 list for 2015 and 25 list for 2014, and Financial Planning magazine’s Influencer Awards. He is a two-time winner of the Journal of Financial Planning Montgomery-Warschauer Editor’s Award, a two-time winner of the Academic Thought Leadership Award from the Retirement Income Industry Association, and a best paper award winner in the Retirement category from the Academy of Financial Services. He is also a contributor to the curriculum of the Retirement Income Certified Professional (RICP) designation. He is a co-editor of the Journal of Personal Finance. He has spoken at the national conferences of organizations such as the CFA Institute, FPA, NAPFA, AICPA-PFP, and AFS. He holds a doctorate in economics from Princeton University and publishes frequently in a wide variety of academic and practitioner research journals. He hosts the Retirement Researcher website, and is a monthly columnist for Advisor Perspectives, a RetireMentor for MarketWatch, a contributor to Forbes, and an Expert Panelist for the Wall Street Journal. His research has been discussed in outlets including the print editions of The Economist, New York Times, Wall Street Journal, and Money Magazine.

Current position (2)

Professor of Retirement Income

The American College

Principal, Director of Retirement Research

McLean Asset Management

Degrees (1)

Ph.D. in Economics

Princeton University

1999 to 2003

Presentations

Presentations (4)

Best Practices for Retirement Income Planning

As the baby boomers reach retirement, advisors must solve new problems for clients. Retirement income is different as clients shift their focus from maximizing wealth to creating sustainable income, clients face a greater range of risks, and clients increasingly must solve a complex lifetime financial problem. Key retirement risks include longevity risk, market and the newly emergent sequence of returns risk, and personal spending shock risks. Each risk requires different income tools and risk management techniques. Two distinct schools of thought have emerged within the retirement income world: probability-based approaches and safety-first approaches. This presentation considers how different retirement income tools can be combined to build more efficient retirement strategies in a many that best integrates aspects from both schools of thought.

Sustainable Spending for Retirement

This session will focus on the probability-based school of thought on retirement income developed by financial planners since the 1990s. The concept of safe withdrawal rates and the 4% rule developed from William Bengen’s analysis of the U.S. historical data. After explaining his approach and further refinements to the core methodology, the session shifts to consider the impacts of a number of key issues and assumptions behind the 4% rule. Ultimately, more sophisticated methods are required and described. Finally, guidance will be provided on thinking more broadly about a retirement income strategy that moves beyond studying sustainable withdrawal rates from a financial portfolio.

Retirement Income Showdown: Risk Premium vs. Risk Pooling

This presentation goes into greater depth about two retirement income tools: using an aggressive investment portfolio to seek greater returns through the risk premium, and using an income annuity with a partial annuitization strategy to seek greater returns through risk pooling. My research finds that risk pooling tends to be underappreciated as a unique source of returns that is unavailable for an investment portfolio in which the retiree aims to self-manage longevity and market risk through conservative spending. Risk pooling provides contractual guarantees for income, greater true liquidity, and the potential for a larger legacy over the long term.

Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement

In the early days, reverse mortgages were generally treated as a last resort option after other resources were depleted, or as a way to obtain quick access to a large lump-sum of assets. This is not the appropriate way to think about reverse mortgages in a retirement income plan, especially in light of recent research. The reverse mortgage option should be viewed as a method for responsible retirees to create liquidity for an otherwise illiquid asset, which in turn can create new options that potentially support a more efficient retirement income strategy (more spending and/or a greater legacy). After providing an overview of retirement income planning, which sets the context for understanding the potential role of reverse mortgages, this presentation explains the basics for how reverse mortgages work. I then provide an overview of potential uses for a reverse mortgage in a retirement income plan.