Chris’s Summary
Jim and I review a recent article featuring Robert Merton’s views on retirement income versus savings, using it as a springboard to unpack income planning fundamentals and annuity projections. While we agree with many of Merton’s framing points—especially the focus on secure income—we also note several key areas where academic theory diverges from real-world retirement dynamics.

Jim’s “Pithy” Summary
Chris and I dig into an article summarizing Nobel Prize winner Robert Merton’s take on retirement income, and I must say—it gave us plenty to talk about! We agree with the premise: retirement is about income, not just a pot of savings. But as always, I’ve got thoughts. Merton’s framing—that income matters more than assets—misses how closely tied the two actually are. You can’t generate income without savings, so they’re not distant cousins—they’re spouses, hand in hand!

We also explore his idea of guaranteed income and how it relates to our own Minimum Dignity Floor approach. His categories echo ours—he starts with guaranteed essentials like food, housing, and healthcare. Sound familiar? He even lists sources like Social Security, pensions, and annuities. But when he suggests a 3% inflation-adjusted annuity from a “highly rated insurer”? Well, good luck finding one. Those vanished after COVID. Today, most annuities with inflation protection are just fixed increases—and even those come at a steep cost.

That leads us into a deep dive on how we handle inflation during the delay period. I explain why projecting future income shortfalls isn’t about guessing—it’s about monitoring trends and setting up flexible reserves. Chris walks through how we model that gap using actual quotes from insurance companies to estimate how much a future retiree might need. Do we recommend buying now? Nope. We wait. Because retirement plans need recalibration every few years— and they’re far more effective when you understand the math and monitor the risks over time.

Show Notes:

Article: Why Retirement Income is More Important than Retirement Savings

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