In this episode of Retire with Style, Alex Murguia and Wade Pfau explore how buffer assets can help manage sequence risk in retirement. They discuss different types of buffer assets—including cash, home equity lines of credit (HELOCs), multi-year guaranteed annuities (MYGAs), and whole life insurance—and examine the trade-offs involved with each. Wade also shares insights on the evolving role of reverse mortgages in retirement planning, emphasizing the importance of weighing costs and long-term implications when incorporating these tools into a financial strategy.

Takeaways

• Buffer assets help manage sequence risk by providing a safety net.
• Cash, HELOCs, and life insurance can serve as buffer assets.
• HELOCs may not be reliable during market downturns.
• MIGAs can be considered buffer assets under certain conditions.
• CDs can also function as buffer assets if withdrawal penalties are minimal.
• Reverse mortgages offer unique advantages but come with costs.
• The perception of reverse mortgages has evolved over time.
• Long-term care costs can be partially covered by reverse mortgages.
• Whole life insurance allows borrowing against cash value.
• Understanding the terms of financial products is crucial for effective planning.

Chapters

00:00 Introduction and Overview of Sequence Risk

02:24 Understanding Buffer Assets

05:32 Exploring Alternatives: HELOCs and Other Options

08:51 Evaluating Multi-Year Guaranteed Annuities (MIGAs) as Buffer Assets

10:51 The Role of CDs and Fixed Indexed Annuities

13:27 The Case Against Gold as a Buffer Asset

16:12 Reverse Mortgages: Risks and Benefits

19:19 Changing Perceptions of Reverse Mortgages

22:31 Long-Term Care and Reverse Mortgages

25:38 Whole Life Insurance Loans and Their Implications

Links

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This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”