Dr. Fowle, what would you define as a buffer asset?

Yeah, so a buffer asset for me, it's when we're thinking about funding retirement through the investment portfolio, the buffer asset would be something that exists outside of the investment portfolio.

And it's not correlated with the portfolio, which is a fancy way of just saying, if the markets are down, the buffer asset's not losing value.

So that growing line of credit on a reverse mortgage, it fits the criteria.

The line of credit doesn't decrease.

It can only increase at a variable rate And so it could become a resource that can allow, you can temporarily spend from the buffer asset temporarily spend from the growing line of credit on a variable rate HECM to manage retirement expenses, to meet your needs for what you have to spend in retirement and to protect your portfolio when it looks to be in trouble.

So it's a temporary resource.

Do you see that as the overwhelming or do you see that as the stereotype is still in all your research and what you've come across in the financial realm?

So when you say getting the most out of your retirement assets, when we're thinking about the stereotypical family, the stereotypical retiree, w- you know, when you bring in housing wealth to the equation, and we're gonna talk a little bit today about buffer assets and other, other topics that you bring up in your, in your research and your book, but when you think about this overall individual or family, somebody that's using or accessing home equity in retirement, who does that person look like to you? What is that stereotypical scenario?

The stereotype for me is different from the, the broader [laughs] stereotype.

So, like, I guess the, the broad stereotype is this idea of the last resort, that individuals who've run out of options might tap into a reverse mortgage to get some additional spending power before really coming to the end of their asset base in retirement.

But that's not the angle I start from because I'm doing research more along the lines of you have...

You've been saving.

You have resources for retirement.

How can you most effectively use those assets? And so typically for individuals who do- do own a home, they also have an investment portfolio that's worth just as much if not more than the housing wealth.

What would be a, something you could tell our, our listener today that is a key takeaway that you've learned in presenting to people about these topics that have made you better at it?

Wade, when you tested blending protection into a portfolio alongside stocks How did you do it, and what did you find was the right balance?

Well, the approach is to look at the efficient frontier, as it's called.

And, and this goes back to the 1950s.

This was really the, the mathematical approach that explains why diversification works.

How can you mix up all the different asset classes, in this case stocks and bonds and indexed annuities, to get in a, the traditional investment mindset, to get the most return for an accepted level of risk? How much volatility are you willing to accept? What's the asset allocation that will give you the highest return for that volatility? And then also then with the lifetime income perspective, uh, look, this is a newer development, but the efficient frontier for lifetime income, where you just define risk and return in terms of being able to meet your spending goals over your lifetime.

In both of those cases, the efficient frontier for thinking about retirement income and protection is that these annuities, the, the fixed index annuity, it's a bond alternative in a retirement portfolio.

So rather than looking at stocks and bonds for the efficient frontier, it becomes much more stocks and annuities, s- stocks and fixed index annuities.

Is gravitating toward more protection a personality trait as much as it is a math problem?

Is it possible for you to talk about these different ways to spend down? What do you like? What do you not like? I know you're not going to tell me there's a perfect way, but what's your favorite way of those three basic categories?

Well, on the math side and research side, The idea is generally the flooring approach that you build a floor of reliable lifetime income to cover basics.

And then you have a lot more discretion on top of that for this is surplus wealth that you can use for more discretionary things.

You can invest aggressively, spend aggressively from the rest because you have that basic floor covered.

And that's the income protection style.

But I've been around at this point long enough to know that there's so much disagreement in the retirement income world.

So the other approach, as you're mentioning, the total return investing style is you don't really worry about reliable income because you're not necessarily differentiating between essential expenses and discretionary expenses.

hire tax rates in the future.

Can you do some stage setting there?

Sure, sure.

And, and so this was based on a, a research project to understand there are different viable retirement income strategies out there people can choose from, and we call those the, the retirement styles.

And when you start to look online about retirement, there's just very deep debates about which approach is best.

And ultimately, uh, you have options.

Different approaches are better for different people based on your preferences.

So whether you're more of a total return investor, you're just gonna focus on taking distributions from your investment portfolio, you use a diversified portfolio the same manner as pre-retirement.

So how would a system like that work in practice?