Get a stronger retirement plan

Who knew we could glean financial information from the World’s Strongest Man competition?

If you’ve seen him recently, you know the winner was a 28-year-old Scot by the name of Tom Stoltman, all 6’8″ tall and 384 pounds.

This year’s competition showed that if an 18-tonne bus blocks your entrance, Tom is your man. Just give him a big rope and back off.

To say Tom is “strong” is an understatement. It is a freak of nature.

And yet, as powerful as Tom is, he would never be able to beat a team of 100 guys with average strength.

And that’s where we find an unexpected bit of financial wisdom.

In retirement planning, the “strong man” is generally considered to be an equity investor. For example, let’s say you do this for the long term and you get a 10% return.

In the next lane, imagine 100 not-so-strong guys. In terms of retirement planning, this team could be likened to the boring world of pension plans and fixed income bonds. For example, let’s say the long-term ROI here is only 5% on average.

No contest, right? Ten percent beats 5% every time.

Except for this fact… If I am a retiree who only uses equity investments to generate my retirement income, I am, in effect, a single person pension plan. Because I don’t know when I’m going to die, I have to plan for a long life.

And since I don’t want to run out of money before I die, I have to be careful about withdrawing money from my nest egg each year. After all, I don’t want to deplete my retirement funds too quickly.

Many experts, trying to strike a balance between productivity and security, recommend that those who follow this “strongman” plan only withdraw 3% of the value of their portfolio each year. These low payout numbers aren’t set in stone, but experts suggest them to avoid problems when markets are turbulent (like right now).

This is where we see the advantage of a “weaker but bigger” team. Retirement planning as practiced by pension plans and insurance companies is based on actuarial science. It simply means that “the calculators have calculated the average life expectancy of a large group of people”.

Essentially, your life expectancy is pooled with that of 10,000 other people. The result is an average. It’s a way of acknowledging that for every retiree who lives to be 100, there’s likely to be another who only lives 100 days after retirement (this is only an illustration, not an actual statistic).

Because of the pooling of risk provided by these actuarial calculations, pension plans and insurance companies can pay what are called “mortality credits” to their retirees. They can promise each retiree a guaranteed payment of interest earned on the capital contributed by the retiree, plus a mortality credit.

What does it mean? Well, depending on the age and gender of the retiree, a pension plan or guaranteed income annuity issued by an insurance company can guarantee a payout of 6% or 7% for life. How can a “weak” investment plan do this, when on average it only brings in 5% income?

The secret is not in the “strength” of the investment, but in the number of investors participating in the pool.

Of course, the figures used here are only illustrative. You should consult your advisor for the numbers that apply to your particular situation.

In short, when planning your own retirement, remember Tom Stoltman’s lesson. The strength of an (approach) is often impressive. But even greater strength is possible when you team up with others. You can benefit greatly by recruiting (actuarial) help.

To help you think more about these issues, I’ve created a comprehensive checklist of pre-retirement questions for people over 60. It’s free! Email me at, and I’ll get it to you right away.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written statement addressing our advisory services and fees is available upon request. Please see Important Disclosure Information at

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