00:00It's a great point because it's, I think, affecting people's behavior quite a bit,
00:04that they're like, oh, the markets are just going to keep going up. And one of the areas that I
00:08focus on is when individuals actually move into retirement and now are going to start to spend
00:13down their money. And in my view is that it's a different problem when you're thinking about
00:20individuals accumulating assets versus spending down their assets. And we've spent the last 40
00:26years, I think, doing a very good job of helping individuals save for retirement. But I don't
00:31think we've spent nearly as much time and effort in helping individuals as they draw down. And the
00:37key point there is we're solving for a different problem. Helping people save for retirement is
00:42very different than helping them live in retirement. Bruce, as you know, we live in a country that is
00:47very bifurcated just in terms of haves and have nots. The Big Take article this weekend was just
00:51an unbelievably scathing one. I mean, I have to say it. It's an amazing article. I read the whole
00:55thing. It's a tax strategy for the rich built by the world's largest hedge fund. And they're talking
00:59about Cliff Asnes, AQR, and tax loss harvesting. For our audience, can you just give us a quick
01:051,000-foot view of what tax loss harvesting is and how important a role it's now playing in
01:12retirement portfolios for the rich? Sure. So, for example, you know, as we know, as you just
01:16alluded to, assets have gone up dramatically, right? So you have a high level of capital gains,
01:21associated with a lot of the underlying stocks. And so the idea is with tax loss harvesting is
01:26trying to find a way, in essence, to offset losses that you may have in your portfolio
01:32with gains. And as a result, you'll net out and mitigate the amount of taxes that an individual
01:37may incur when they're selling out of a position. Right, right. And that clearly has become increasingly
01:43important over time. Barron's does eight pages last week on annuities. I think you're dead on
01:50and that the entire thing was successfully to build up a pot. And now we've got to figure
01:55out what to do with it. Are annuities efficacious as a way to structure income outflow of a retirement
02:02plan? They are one, for sure. They're one way to do it. And they're very simple annuities that
02:08you can use. And the point that I would make is when you're thinking about moving into retirement,
02:12basically, I'd create two buckets. I have one bucket that's associated with delivering cash
02:18flows. So maybe your required expenses or necessities. Then you have another bucket for
02:24discretionary spend. And for that bucket that's associated with the required, I think you want
02:29to look towards solutions. And there are interesting investment solutions as well, aside from annuities,
02:35that will deliver those cash flows, right, and give you that level of certainty.
02:38Right. And then for the rest of your portfolio, you basically can go ahead and you can invest that
02:43more aggressively. Yeah. Is your math 4% is still the bogey on retirement? Because there's a whole
02:50industry out there saying you can go higher. Scary. Okay. So I have a fundamental view that I think the
02:564% rule is something that is an interesting rule of thumb, but for some reason has become the retirement
03:04strategy for many people out there. And I don't think that's correct, right? The 4% rule, if you go
03:09back to how it was
03:10designed, does not really reflect the realities and the complexities of people moving into retirement.
03:15One last question here. Every single guest, every single guest we've had on today is talking about shorting
03:20duration, shorting the long end of the yield curve. Yet that is critical part of the yield curve for insurers,
03:25for
03:25pensions. Talk to us about what this all means. If people stop buying long dated paper, long dated treasury
03:30paper here in the US, how is it going to impact the pension market?
03:34Yeah. So as it relates to, yeah, so buying less into the market obviously is going to drive up rates.
03:41It's what we're seeing now is, right, rates are up, which makes annuities attractive, more attractive
03:47than they were, you know, five years ago, for example.
03:51Who was holding those annuities that were issued five years ago? That's the real problem, right?
03:54Yeah. And that's why I don't think you want to think about buying annuities as that's going to be
03:59the be all, you know, in terms of a strategy for you. It should be a component. And I would
04:03actually
04:03say the most effective way to think about annuities is around protecting against longevity.
04:09Money question. ERISA, 1974. Were we better off with a defined benefit architecture than this modern
04:17everyone for themselves architecture?
04:19Sure. Yeah. I mean, I think if you could go back in time and ask individuals, do they want a
04:25defined
04:26contribution program or a defined benefit program? You would clearly, I think, hear from individuals
04:30that they prefer to have a defined benefit program. And if you really think about the direction of travel
04:36with the D.C. structure, it's moving more and more towards trying to replicate as much as possible.
04:42I agree.
04:43Yeah.
04:43Right. So it's a little bit of back to the future in terms of the structure and be it within
04:47a 401k
04:48or even through the wealth management side of the house. It's the same deal.
04:50So, well, talk to us about the hedging that insurers have to do in order to match their
04:53liabilities. Right. And I mean, I come back to this thought that, you know, Dr. Crowe was
04:58talking about earlier that, you know, the participation of leveraged funds, of hedge funds
05:02in the U.S. Treasury market, especially at the long end and how volatile that's starting
05:06to get. You know, what does that mean when you're inside one of these very sophisticated,
05:11long dated perpetual insurers and you have to kind of match your liabilities to this?
05:16I mean, like, does it become more expensive? Does it be I mean, at what point does the rubber
05:19meet the road here?
05:21Yeah, sure. Absolutely. It'll become more expensive.
05:23Yeah.
05:23You know, there's no question. And the and, you know, and then kind of coming back to for
05:27individuals. Right. Because this is the idea that if individuals are going to be more and
05:32more either automatically put into annuity, like, for example, we've seen trends with target
05:38date funds.
05:39That's right.
05:39Right. Where an annuity is now attached to it that either you automatically put into it
05:43or you would be able to actively move into it. You know, I think the annuity market is
05:48going to become more and more democratized in a sense that more and more people are going
05:53to be.
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