Safety-First Retirement Planning With Wade Pfau

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[141] – Everyone wants to feel a sense of safety with their retirement plan. That’s why Wade Pfau wrote Safety-First Retirement Planning to help you understand and prioritize safety in your retirement planning process.

In this episode, Jeremy Keil speaks with Wade Pfau, Ph.D., CFA, RICP, Founder of Retirement Researcher and professor of retirement income at the American College, about safety-first retirement planning. Wade details what safety-first retirement planning is and explains why it’s an important starting point for retirement planning.

Wade discusses:

  • What the 4 different retirement styles are
  • What a safety-first retirement plan is
  • Why delaying Social Security is the best annuity you can buy
  • His research about when to claim Social Security
  • How you can give yourself a better probability of success in retirement
  • How his retirement income dashboard helps people make retirement choices
  • Seven rapid-fire questions
  • And more

Safety-First Retirement Planning

Retirement planning can be a daunting task with concerns of when you should take Social Security, how you should pace using your retirement investments as income, and just an overall worry about planning a successful retirement because you only have one shot at retirement. Wade Pfau, Ph.D., CFA, RICP, Founder of Retirement Researcher and professor of retirement income at the American College, about safety-first retirement planning, shares some information about what safety-first retirement planning is and the importance of finding a personalized approach to retirement planning.

What are the four main retirement planning strategies?

The four main retirement planning strategies are total returns, time segmentation, income protection, and risk wrap. 

In the past, total returns has been called systematic withdrawals. It’s the idea of building a diversified investment portfolio and spending from it as you go through retirement.

Time segmentation can also be called bucketing, and it’s when you invest differently based on the time horizon, such as bonds for short-term expenses and stocks for long-term expenses.

Income protection has also been called flooring or essentials versus discretionary, and it’s when you first build a floor-protected lifetime income to cover your basics. Then you can invest on top of that for more discretionary types of goals.

Risk wrap is for individuals who are fundamentally just more comfortable with the market but still want some sort of protected income floor as well. That’s where different types of annuity innovations over the years may speak to that in terms of being able to invest for the upside while still having downside protections in place.

It is important to find a retirement strategy that aligns with your preferences and comfort level.

What is safety-first retirement planning?

Safety-first retirement planning focuses on ensuring a secure financial foundation before delving into market investments and volatility. Wade Pfau wrote his book, Safety-First Retirement Planning, and explains a safety-first retirement plan as a contractual protection strategy.

It involves seeking income protection and utilizing time segmentation or deferred fixed annuities to cover shorter-term expenses while preserving the principal amount until maturity.

The primary goal of safety-first retirement planning is to establish a lifetime flooring of reliable income sources. These sources typically include Social Security benefits, traditional company pensions, and other forms of guaranteed income. By securing these essential income streams, individuals can bridge the gap between their desired retirement lifestyle and the income provided by these reliable assets.

In cases where there is still a shortfall in meeting retirement income goals, safety-first planning suggests considering annuities that offer protected lifetime income. These annuities leverage risk pooling to provide competitive returns compared to stock market investments, ensuring a stable and predictable income throughout retirement.

Overall, safety-first retirement planning emphasizes the importance of securing guaranteed income sources and protecting against market volatility before considering riskier investment options.

Should I delay Social Security?

Delaying Social Security can be a smart move. According to Wade Pfau, it’s the best annuity you can buy. By delaying Social Security benefits until age 70, individuals, particularly high earners, can maximize their lifetime income.

Today, with lower interest rates and increased life expectancy, delaying Social Security offers a higher probability of achieving a substantial lifetime income.

If funding your retirement during the delay period concerns you, Wade Pfau suggests creating a Social Security delay bridge where it’s acceptable to spend down other investment assets more rapidly since once Social Security benefits begin, there will be a significant boost in income. This approach reduces the pressure on investment assets in the long term. To implement a delay bridge, Wade recommends constructing a bond ladder or other low-risk income-generating assets to cover the income gap during the delay period.

Delaying Social Security can lead to increased lifetime income and potential legacy benefits. Carefully managing investment assets and utilizing income-bridging techniques can help you navigate the delay period and optimize your retirement income strategy.

How can I give myself a better probability of a successful retirement?

The first thing you can do to improve your probability of a successful retirement is understand the odds and consider longevity. Instead of relying on guesswork or assumptions, it’s important to seek out and understand the probabilities associated with retirement decisions. For example, you can explore the odds of reaching a certain age, the odds of various Social Security or pension scenarios, and the odds of different outcomes for couples. Since people often don’t die on time, it’s crucial to account for potentially longer lifespans in retirement planning. Tools like can provide insights into life expectancy probabilities based on age, gender, health status, and other factors.

You can also update your withdrawal strategies. Wade Pfau’s Retirement Income Dashboard is a tool designed to help you assess sustainable withdrawal rates. By considering factors like the current market environment, interest rates, annuity payout rates, and asset allocation, you can adjust your withdrawal strategy to adapt to changing circumstances.

Lastly, be aware of different retirement income styles. There are different ways to approach retirement, it’s not just about following a fixed 4% rule or assuming a constant withdrawal rate. Instead, you should be open to considering various withdrawal strategies, such as inflation-adjusted spending or variable spending based on market performance.

Why is it important to take a personalized retirement approach?

It’s important to take a personalized retirement approach because there is no best way to plan for your retirement income. There are four broad retirement styles and the best way to plan is to identify which style resonates best with your personality and comfort, and then plan according to that style.

In the end, the best way to plan for retirement is the way that matches how you want to approach retirement, not necessarily what a financial advisor thinks is best. Financial advisors who are comfortable with any of these different styles are going to be best positioned to help the most people compared to those who believe there’s only one way to do things.


To learn more about Safety-First Retirement Planning, check out the resources below!

If you have any questions, feel free to contact us or our guest, Wade Pfau, using the contact information provided below!


Connect With Wade Pfau:

Connect With Jeremy Keil:

About Our Guest:

Wade D. Pfau, PhD, CFA, RICP® is the founder of Retirement Researcher, an educational resource for individuals and financial advisors on topics related to retirement income planning. He is a co-founder of the Retirement Income Style Awareness tool and a co-host of the Retire with Style podcast. He also serves as a principal and the director of retirement research for McLean Asset Management. He also serves as a Research Fellow with the Alliance for Lifetime Income and Retirement Income Institute. He is a professor of practice at the American College of Financial Services and past director of the Retirement Income Certified Professional® (RICP®) designation program. He holds a doctorate in economics from Princeton University and has published more than sixty research articles in a wide variety of academic and practitioner journals.



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