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
00:00Introduction and Overview of Sequence Risk
02:24Understanding Buffer Assets
05:32Exploring Alternatives: HELOCs and Other Options
08:51Evaluating Multi-Year Guaranteed Annuities (MIGAs) as Buffer Assets
10:51The Role of CDs and Fixed Indexed Annuities
13:27The Case Against Gold as a Buffer Asset
16:12Reverse Mortgages: Risks and Benefits
19:19Changing Perceptions of Reverse Mortgages
22:31Long-Term Care and Reverse Mortgages
25:38Whole Life Insurance Loans and Their Implications
Links
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The Retirement Planning Guidebook: 2nd Edition has just been updated for 2025! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/
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”
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