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Speaker 1: 00:06 Bob Powell, editor of the street's retirement daily, and I'm talking with Michael [inaudible]. Michael just delivered a presentation at the investments and Wealth Institute and you will conference experience on some trends in the retirement planning world. Then Michael, one of the interesting trends that you talked about was this notion of how personality affects a portfolio withdrawal rates. You get or have you discussed more about that? Absolutely. Yeah. Thanks for having me. So a lot of the research has been done typically on these systematic withdrawals. So your client can withdraw 4% a year, 3% a year out of the portfolio. And what does that do with, with failure rates? But a lot of the emerging research is looking more on the behavioral side of this client psychology side of how we might want to assess the personality traits of our clients. Because a lot of those personality traits can be predictive of how they save preretirement, how much debt they accumulate.

Speaker 1: 00:54 And then after retirement, specifically, what did we draw our rates might look like out of a portfolio. Right? So some personality traits tend to have higher portfolio withdrawal rates. Others didn't have lower, and a lot of that information can be very valuable to advisors, but a lot of advisors aren't in assessing their client's personality traits. So you know, very simple thing than an advisor can do much like they do with the risk tolerance questionnaire, right? Then it's very compliance based, let's give everyone this, this questionnaire to figure out their risk preferences is to also give them like a Myers Briggs personality test to see where, where they are in terms of the big five personality traits and then those types of things can help again, make me potentially predictions on behavioral aspects of clients. Right, and you talked about ocean being one of the, the the key personality trait testing mechanisms.

Speaker 1: 01:42 That is correct. So the acronyms ocean, so openness, conscientiousness, extroversion, agreeableness, neuroticism, those five we tend to gravitate towards one of those five. And to know which one your client kind of leans towards, again, can be very, very predictive. At least what the early research is saying on a bunch of these different behaviors, both pre and post retirement. Right. And so in terms of, I'll just take one of those traits, openness. The person who was more open than say closed is more inclined to do what with their portfolio? Yes sir. All right. Yes sir. If, if they were more, if they were more open, they tended to have lower portfolio withdrawal rates compared to somebody who didn't have that openness trade or somebody who is more, tended to be more agreeable, tended to take out more money out of their portfolio in retirement compared to somebody who wasn't agreeable.

Speaker 1: 02:30 Right. In terms of the personality traits spectrum, right. And, and obviously this research is somewhat new and hasn't necessarily been implemented into the real world yet. It's fair to say that is, that is definitely accurate. It's, it's emerging in the academic side. It just came out of a colleague of mine, Sarah has a Beta, is doing some great work on it and yes, it on the, I can see them excited. It's new and it's not being implemented on the practitioner side yet. But I do think over the next five, 10 years that there should be tremendous growth in this area. Right. So one of the things that you talked about in your presentation today was this notion of as we get older, the things that drive happiness, Michael think has done a lot of work around happiness. Talking about investing in social relationships. You had a slide up that looked at extraordinary versus ordinary experiences and how they change over time.

Speaker 1: 03:16 So just talk a little bit about that. Yeah, so an ordinary experience would be things like your social relationships, right? Cause and an extra ordinary experience would be something like going on a trip, right? And we know from the past research that experience has make us happier than buying material objects. But it's really these socially shared experiences, these ordinary experiences, right? The relationships that we developed with our close friends and family early in life, those are the things by curing those on later in life into retirement, that's what makes us most happy. Again, as opposed to things like going on, exotic trips, trips going on that Alaskan cruise, while yes, that makes us happy, maybe not as much as some of the social, the social side of it. Right? So if I'm a retiree and I'm spending time with my grandchildren or my adult children or a on gardening or whatnot, or volunteering at my church or synagogue, those are the things that ultimately make me happy in retirement.

Speaker 1: 04:09 Absolutely. Yeah. All the research would indicate that, that those are specific things that would make you happier as opposed to, you know, buy in that new television, buying that new car. Right. Absolutely. Right. So the last thing that you talked about, and I think it's somewhat interesting, people have written about it, but it still strikes me as worth talking about, which is the great divorce issue. So what's going on in there? Yeah, it's really fascinating. So most people think that when you're younger, you tend to have a higher likelihood of divorce. Right? And it is true that after you, after you get married within that first year, that is a high probability of divorce. But really when you look at the different generations, right? So the millennials versus gen x and the boomers there is, has been a massive increase from your 1992 today on the divorce rate among people that are 50 and older.

Speaker 1: 04:53 Oh, doubled more than doubled the divorce rate between 1990 and today of those individuals, 50 and older. Right. And a lot of that I think is driven by, well, well two things. Women are more financially independent and able to break away easier than they used to otherwise be able to do. And if people are living longer and longer, right. So you, as you get older, you don't want, if you're stuck with the wrong person and you're living until 90 95 years old, right. That creates a greater opportunity than to, to end the marriage. So, but yeah, very interesting statistics on that. And, and that has big implications for individuals in financial guarantees. So it strikes me as somewhat disheartening that someone would wait 30 years to figure out that though with the wrong person. Yeah. And some of that has to do with children. So I'll let you know big time to get where divorces happen is both children leave the nest. It's just that the two spouses and, and that's all we had to talk about for 30 years was our kids. Yeah, I'm going to talk about exactly. Yeah. And then unfortunately as sometimes they part ways, so. Right. Anything else worth mentioning before we close out? I think that's it. Yeah. Thank you so much for having me. Great. So my guest has been Michael Gomez. He is an assistant professor at Texas, a unit of Texas Tech University. And we here at the investments and Wealth Institute conference in Las Vegas. Thanks for watching. I'm Bob Power, editor of retirement daily.

It's true, your personality could be dangerous to your wealth. 

Research is now showing that your personality plays a large role in how much (or how little) you withdraw from your retirement portfolio. It has two "from your" as it now reads. Or at least so says Michael Guillemette, an assistant professor at Texas Tech University, who spoke last week at the Investments and Wealth Institute's annual conference.


According to Guillemette, personality traits determine how you might save for retirement as well as how much you'll withdraw from your retirement accounts. So, for instance those who exhibit the "openness" personality trait tend to have lower portfolio withdrawal rates while those who exhibit the "agreeable" personality trait tend to have higher portfolio withdrawal rates. Openness describes a person's tendency to think in abstract, complex ways, while agreeableness describes a person's tendency to put others' needs ahead of their own, and to cooperate rather than compete with others, according to Truity.com.


For his part, the new research could be used in conjunction with other test, such as a risk tolerance quiz, to better understand your tendencies with respect to money. Learn more about this research here.


Guillemette also discussed the notion that retirees over time tend to value ordinary experiences - time spent with grandchildren for instance -more than extraordinary experiences such as exotic trips and buying things such as cars. And those ordinary experiences are what will make you happy - truly happy -- in retirement.

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Need help preparing for retirement? Check out Retirement Daily.