Great episode, Phil's segment shedding a bit more light on how the topics Ben and Cameron discuss every week is implemented in PWL advisor-client interactions was fascinating. As a DIYer I was impressed, especially the advice to try to focus the urge to tinker or feel in control on spending rather that portfolio changes. I see a lot of portfolio tinkering discussion in DIY communities that should know better, when all of that mental effort would be 10x more useful when directed at savings rate in accumulation and spending rate in deaccumulation. Hearing an advisor hit on that topic as a productive solution to client anxiety is refreshing.
Long-time listener/ subscriber here. I like the new format and contributions by your esteemed colleagues. I think the podcast is becoming very informative and helpful to a wider audience. The book summary and 4 Ds of tax planning segments were great. Thanks for another great episode👍
@22:35 - Phil's suggestion that instead of a cash wedge you should spend less in the down years and then make up for it later sounds good in theory but the issue is that as we get older we don't spend as much money. So for example if someone is in their Go-Go years and the market takes a down turn for 2 years and you spend less...you have just missed out on some of the best years of your retirement. What's the good of having more money to spend later if you are not healthy enough to spend/enjoy it? I will have to look at the studies as I would like to know generally how much worse off you would be in implementing a cash wedge as opposed to being "fully invested". Also, I would like to see if the study looked at someone holding actual cash or very low risk investment (GIC, HISA ETF, Money Market fund) which will have lower returns but would be better than cash under the mattress.
Cash wedge is definitely a good concept for those that have a bit more money and lower risk tolerance. If you absolutely need the max out of your retirement savings then not ideal but to keep someone from panicking during a selloff it seems to be a decent strategy.
Great show on an unfortunately very common practice among DIYers and less informed advisors. Did you have the cites to both papers on the cash wedge/bucket? I only see the one above at ssrn.
However, if you have asset allocation ETFs you cant just sell from bonds or sell from stocks. Therefore I did set up a cash wedge in GIC's for 2-3 years income to buffer sequence of return risk.
Could you psychologically manage the cash wedge by showing the client a "withdrawal" account with the conservative assets they can use to take the money out, but when used, the rest of the retirement portfolio gets rebalanced?
Cash Wedge is a good idea because Bonds can lose value but GICs and/or HISA ETFs. With Wealthsimple, they don't have GICs so your only option is HISA ETFs. You can do Bond ETFs but you might lose on the Bond ETF.
My return from portion of my GIC & Market funds are much higher than bonds. Any plan don’t consider the current environment is moot point. Also need to consider the stage of their financial life. Disappointed on this segment of your talk.
Cash wedge can be very helpful in the early years. Your studies are flawed because nobody should be having a cash wedge throughout retirement that is just dumb. Have a cash wedge at the beginning if needed. I plan to have a short term bond fund with about 3 to 4 years of expenses. After I reach SS if it is not spent I will spend. Use a cash wedge at the start but of course if you maintain it throughout retirement you will likely be worse off. You don’t need to complicated study to know that. 😑
Great episode, Phil's segment shedding a bit more light on how the topics Ben and Cameron discuss every week is implemented in PWL advisor-client interactions was fascinating. As a DIYer I was impressed, especially the advice to try to focus the urge to tinker or feel in control on spending rather that portfolio changes. I see a lot of portfolio tinkering discussion in DIY communities that should know better, when all of that mental effort would be 10x more useful when directed at savings rate in accumulation and spending rate in deaccumulation. Hearing an advisor hit on that topic as a productive solution to client anxiety is refreshing.
Long-time listener/ subscriber here. I like the new format and contributions by your esteemed colleagues. I think the podcast is becoming very informative and helpful to a wider audience. The book summary and 4 Ds of tax planning segments were great. Thanks for another great episode👍
Thank you as always. Really appreciate the work you all do!
@22:35 - Phil's suggestion that instead of a cash wedge you should spend less in the down years and then make up for it later sounds good in theory but the issue is that as we get older we don't spend as much money. So for example if someone is in their Go-Go years and the market takes a down turn for 2 years and you spend less...you have just missed out on some of the best years of your retirement. What's the good of having more money to spend later if you are not healthy enough to spend/enjoy it?
I will have to look at the studies as I would like to know generally how much worse off you would be in implementing a cash wedge as opposed to being "fully invested". Also, I would like to see if the study looked at someone holding actual cash or very low risk investment (GIC, HISA ETF, Money Market fund) which will have lower returns but would be better than cash under the mattress.
Wonderful conversation! Very motivating.
Cash wedge is definitely a good concept for those that have a bit more money and lower risk tolerance. If you absolutely need the max out of your retirement savings then not ideal but to keep someone from panicking during a selloff it seems to be a decent strategy.
Gas station sushi crew checking in ⛽️ 🍣
Great show on an unfortunately very common practice among DIYers and less informed advisors.
Did you have the cites to both papers on the cash wedge/bucket? I only see the one above at ssrn.
blog.iese.edu/jestrada/files/2019/01/BucketApproach.pdf
papers.ssrn.com/sol3/papers.cfm?abstract_id=1969021
Have to ask - does PWL have a "hair code" in the same way other companies have a dress code? ;)
However, if you have asset allocation ETFs you cant just sell from bonds or sell from stocks. Therefore I did set up a cash wedge in GIC's for 2-3 years income to buffer sequence of return risk.
Could you psychologically manage the cash wedge by showing the client a "withdrawal" account with the conservative assets they can use to take the money out, but when used, the rest of the retirement portfolio gets rebalanced?
Or a rolling cash wedge? Start with a whole 12 months . Each month you spend from cash wedge, you sell 1 month of stocks to put in the cash wedge.
Cash Wedge is a good idea because Bonds can lose value but GICs and/or HISA ETFs.
With Wealthsimple, they don't have GICs so your only option is HISA ETFs. You can do Bond ETFs but you might lose on the Bond ETF.
My return from portion of my GIC & Market funds are much higher than bonds. Any plan don’t consider the current environment is moot point. Also need to consider the stage of their financial life. Disappointed on this segment of your talk.
Cash wedge can be very helpful in the early years. Your studies are flawed because nobody should be having a cash wedge throughout retirement that is just dumb. Have a cash wedge at the beginning if needed. I plan to have a short term bond fund with about 3 to 4 years of expenses. After I reach SS if it is not spent I will spend.
Use a cash wedge at the start but of course if you maintain it throughout retirement you will likely be worse off. You don’t need to complicated study to know that. 😑
This makes no sense.
-Ben