Kitces: Phrases That Should Be Banished From Retirement Planning

[Htown Harry]

Michael Kitces has posted an interesting essay that examines some of the common phrases used in retirement planning. The concepts he discusses are frequent subjects here on E-R.org.

As the research into behavioral finance has shown, the words we use and how concepts are framed can have a powerful impact on how we see the world and consider the opportunities that may lie before us. A strategy can go from being appealing to terrifying based solely on how it’s explained. And in the context of retirement, there are a lot of words and phrases that may unintentionally be hampering our efforts to have a productive planning conversation.

He proposes the following substitutions:

[-]probability of failure[/-] probability of adjustment
[-]probability of success[/-] probability of excess
[-]retirement income[/-] retirement cash flows
[-]retirement[/-] financial independence

...reframing retirement as financial independence goes beyond just what one will do in that “retirement” phase; it also changes the context of the retirement goal, where the target instead is simply to reach that point of financial independence, and to recognize that the accumulation of assets is just part of the transition of replacing income-from-work with cash-flows-from-assets instead. The approach allows for a much more productive transition into “partial retirement” as well; after all, for many people, their “financial independence” job might actually still be a job that does generate some income, which means the transition point to “financial independence” may be far closer than what it takes to “fully retire” instead.

Financial Independence In Lieu Of Retirement, And Other Phrases That Should Be Banished From Retirement Planning | Kitces.com

What words would you banish from retirement planning discussions? Why?

 

[seraphim]

I'd forbid FAs from saying, "oh, YOU don't pay me - the company pays my fee..."

Yea. Right.


Sent from my iPad using Early Retirement Forum

 

[Meadbh]

"Safe investment". It's an oxymoron.

 

[foxfirev5]

Call it what you want the facts remain the same. LBYM, save and invest and you'll be OK.
I guess new buzz phases are what keeps these guys in the news.

 

[ArkTinkerer]

I must admit to being irked by the new Voya TV ad. They are going to help me "think different about money". Really only difference is they changed their name. Stupid marketing! Yeah you got me to go to your web site but all you did was waste my time and piss me off.

 

[Chuckanut]

I must admit to being irked by the new Voya TV ad. They are going to help me "think different about money". Really only difference is they changed their name. Stupid marketing! Yeah you got me to go to your web site but all you did was waste my time and piss me off.

Personally, I think differently every time I see one of these ads.

 

[ArkTinkerer]

Your English teacher would be proud of you...

 

[H2ODude]

Wealth management? Pffft.

 

[MBAustin]

Good article. I agree that the words we use are important because of the images they bring up - especially words such as "failure".

I would eliminate "free dinner".

 

[heeyy_joe]

I never understood where "cut the mustard" came from, as in "that investment really cuts the mustard". Maybe it is being mistaken for "passes muster"?

 

[MissMolly]

I never understood where "cut the mustard" came from, as in "that investment really cuts the mustard". Maybe it is being mistaken for "passes muster"?

According to phrases.org.uk

Cut The Mustard -

There has been an association between the heat and piquancy of mustard and the zest and energy of people's behaviour. This dates back to at least 1672, when the term 'as keen as mustard' is first recorded. 'Up to mustard' or just 'mustard' means up to standard in the same way as 'up to snuff'. 'Cutting' has also long been used to mean 'exhibiting', as in the phrase 'cutting a fine figure'. Unless some actual evidence is found for the other proposed explanations, the derivation of 'cutting the mustard' as an alternative way of saying 'exhibiting one's high standards' is by far the most likely.

 

[braumeister]

What words would you banish from retirement planning discussions? Why?

"This time it's different."

"This approach has been thoroughly backtested and has worked every time."

 

[BBQ-Nut]

For retirement planning, why wouldn't one want to keep the phrase "probability of failure" - that SHOULD cause pause and fear for a poor plan.

 

[W2R]

Your English teacher would be proud of you...

I would agree with him/her. If we don't defend proper English to the best of our abilities, the adverb could disappear before long. I am not a role model when it comes to good English, but I do like adverbs.

 

[photoguy]

For retirement planning, why wouldn't one want to keep the phrase "probability of failure" - that SHOULD cause pause and fear for a poor plan.

Probably because he has to spend time educating his clients on what exactly failure and success mean whereas everybody makes adjustments (no explanation needed).

 

[RonBoyd]

"This time it's different."

So it is this time? I knew they were wrong.

 

[Badger]

I never understood where "cut the mustard" came from, as in "that investment really cuts the mustard". Maybe it is being mistaken for "passes muster"?

Makes me smile when on a cruise ship going to the lifeboat drill and people are wondering why we are having a mustard drill.

Cheers!