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Jamie Hopkins: How Low Bond Yields, Recession Impact Retirement Planning

A noted retirement specialist discusses the benefits and challenges of working longer, the virtues of Roth assets, and building retirement portfolios to last.

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Our guest on the podcast is retirement expert Jamie Hopkins, who is managing director of Carson Coaching and the director of retirement research at wealth management firm Carson Group. He's also a finance professor of practice at Creighton University's Heider College of Business. Hopkins wrote the book Rewirement: Rewiring the Way You Think About Retirement!, and he's a regular contributor to Forbes, InvestmentNews, and MarketWatch. Prior to joining Carson Group, he was with The American College of Financial Services, most recently serving as director of retirement research. He received his bachelor's degree from Davidson College, his law degree from Villanova University, and his Master of Laws from Temple University. He's also a certified financial planner, a chartered financial consultant and a chartered life underwriter. Hopkins co-hosts a podcast that launched earlier this year. It's called Framework.

Disclosure: CWM, LLC, an affiliate of Carson Group, licenses and/or offers products and services of Morningstar and its affiliates.

Background Jamie Hopkins bio

Rewirement: Rewiring the Way You Think About Retirement

Behavioral Coaching "How the Human-to-Human Connection Helps Facilitate Positive Behavior Change," by Derek Tharp,, Aug. 16, 2017.

"Using Behavioral Finance Principles to Behaviorally Coach Clients to Make Better Decisions," by Jay Mooreland,, May 13, 2020.

Your Mental Wealth, Klontz Consulting Group

"Help Clients Overcome These 3 Common Emotional Biases," by Jamie Hopkins, InvestmentNews, June 3, 2020.

"The Neuroscience of Decision-Making Explained in 30 Seconds," by Christian Jarrett, Wired, March 18, 2014.

"The Social Security Mistake Risk-Averse Folks Make," by Jamie Hopkins, Kiplinger's, July 9, 2019.

The Pandemic's Effects on Retirement Planning and Older Workers "Jonathan Guyton: What the Crisis Means for Retirement Planning," by Christine Benz, Jeff Ptak, and Jonathan Guyton,, June 16, 2020.

Paychecks and Playchecks: Retirement Solutions for Life, by Tom Hegna, 2011.

"4 Reasons to Work Longer," by Rebecca Koenig, U.S. News & World Report, June 1, 2018.

"Working Longer and Other Ways to Optimize Retirement Income," T. Rowe Price.

"The Pandemic Paradox for Older Workers," by Richard Eisenberg,, May 19, 2020.

"A Coronavirus Recovery: How to Ensure Older Workers Fully Participate," by Monique Morrissey, Economic Policy Institute, April 16, 2020.

"A Pandemic Problem for Older Workers: Will They Have to Retire Sooner?" by Mark Miller, The New York Times, June 26, 2020.

Retirement Portfolio Planning "Cutting Interest Rates Hurts Retirees the Most," by Jamie Hopkins, Forbes, Aug. 3, 2019.

"7 Ways an Interest Rate Cut From the Fed Can Impact Retirees," by Matthew Goldberg,, March 15, 2020.

"How's Your Bond Fund Holding Up?" by Miriam Sjoblom,, March 18, 2020.

"How Short-Term Bond Funds Went Wrong (Again)," by Miriam Sjoblom,, July 1, 2020.

"4 Ways to Manage Sequence of Returns Risk," by Jamie Hopkins, Forbes, Oct. 30, 2019.

"The 4 Percent Rule Is Not Safe in a Low-Yield World," by Michael S. Finke, Wade D. Pfau, and David Blanchett, Journal of Wealth Management, Jan. 15, 2013.

"Is the '4% Rule' Broken?" by Christine Benz and Wade Pfau,, July 10, 2020.

"Decision Rules and Maximum Initial Withdrawal Rates," by Jonathan T. Guyton and William J. Klinger, Journal of Financial Planning, March 2006.

"3 Reasons Annuities Are the Unsung Heroes of Retirement Income Planning," by Jamie Hopkins, Forbes, June 14, 2019.

"Can Annuities Become a Bigger Contributor to Retirement Security?" by Martin Neil Baily and Benjamin H. Harris, Brookings, June 2019.

"Fixed Index Annuities: Consider the Alternative," by Roger Ibbotson, Zebra Capital Management, January 2018.

"3 Advantages of Using Fixed Indexed Annuities in Retirement," by Jamie Hopkins, InvestmentNews, Oct. 23, 2019.

"Mitigating the 3 Common Conflicts of AUM Fiduciaries," by Jamie Hopkins, InvestmentNews, Jan. 10, 2020.

The CARES Act and Retirement Planning "5 Ways the CARES Act Impacts Retirement Planning," by Jamie Hopkins, Forbes, April 10, 2020.

"3 Roth Conversion Traps to Avoid After the SECURE Act," by Jamie Hopkins, Forbes, Jan. 21, 2020.

"Why the SECURE Act Makes 2020 the Year of Missed RMDs from IRAs," by Jamie Hopkins, Forbes, Dec. 18, 2019.

"How You Can 'Undo' 2020 Retirement Distributions and RMDs," by Jamie Hopkins, Forbes, May 1, 2020.

"Advancing the Study of Using Future-Self Images to Alter Behavior," by Carla Fried, UCLA Anderson Review, Sept. 26, 2018.


Jeff Ptak: Hi, and welcome to The Long View. I'm Jeff Ptak, global director of manager research for Morningstar Research Services.

Christine Benz: And I'm Christine Benz, director of personal finance for Morningstar, Inc.

Ptak: Our guest on the podcast today is retirement expert Jamie Hopkins. Jamie is managing director of Carson Coaching and the director of retirement research at wealth management firm Carson Group. He's also a finance professor of practice at Creighton University's Heider College of Business. Jamie wrote the book Rewirement: Rewiring the Way You Think About Retirement!, and he's a regular contributor to Forbes, InvestmentNews, and MarketWatch. Prior to joining Carson Group, he was with The American College of Financial Services, most recently serving as director of retirement research. He received his bachelor's degree from Davidson College, his JD from Villanova University, and his LLM degree from Temple University. He's also a certified financial planner, a chartered financial consultant, and a chartered life underwriter. Jamie co-hosts a podcast that launched earlier this year. It's called Framework.

And before we get into the conversation today, we'd like to share a bit of disclosure. CWM, LLC, an affiliate of Carson Group, licenses and/or offers products and services of Morningstar and its affiliates.

Jamie, welcome to The Long View.

Jamie Hopkins: Thanks for having me on. Really appreciate it.

Ptak: Oh, it's our pleasure. For our listeners who maybe aren't as familiar, can you give a bit of background on what Carson Group is and what you do for them?

Hopkins: Absolutely. I'll give a little bit of background. So, I've been with Carson Group for about a year and a half, and my role has changed substantially even over that time period. But going back a little bit before that, I was at American College for almost seven years and helped head up, along with Professor David Littell, the retirement-income program there, which we developed the RICP--Retirement Income Certified Professional designation--and I love that program. It's near and dear to my heart because I helped build it, and Wade Pfau then took over for me essentially in that role, and I came over to Carson Group really to run up at that time, about a year-and-a-half ago, the retirement division. So, just anything retirement-income, retirement-related kind of fell into my purview there.

And we have at Carson Group about 123 RIAs or IARs that roll into the partnership per se and help support all of those independent advisors out there in the world. Now, this year, things changed a little bit, so my normal research writing and retirement-process-related work … Ron Carson, our CEO, asked me to head up one of the other companies that we run, which is Carson Coaching. So, we coach about 1,200-1,300 advisor firms out there on best practice management strategies. I stepped into that role at the beginning of the year and now I'm fully in that. The retirement stuff still rolls up to me, but honestly, the last couple months I've been moving forward with a lot of our coaching initiatives. We roll out a new LMS and coaching platform this year, which is really exciting. It's about 10 years since the last one rolled out, so this digital and virtual world is very much in need of seeing a new program. So, excited about that and excited to be on the show. I mean, those are kind of the basics. I help a large RIA with the retirement planning and build out a coaching program on the side there. So that's what I spend my time doing.

Benz: There seems to be a burgeoning career path for people like you, people who train advisors. Is it your perception that that space is growing a lot and why do you think that is?

Hopkins: There's definitely a career path in the training of advisors in a lot of different areas. I've noticed as of recently too the number of advisor specialists in the marketing side has grown substantially, in the PR side. The retirement-income side is where I started really training advisors. And there's a couple reasons for that.

One of them is that if you look at a lot of the large mutual traditional insurance companies that were out there, during my time at American College, we saw a number of them actually pull back either on their spend or their internal. We've also seen this move towards independents out there in the world. And, all of a sudden, if you're an independent RIA, you don't necessarily have a huge training and development program, right? It might just be you. And so, we're seeing more and more need to train or provide information for those independents or those people where company training has scaled back over the years.

So, I do expect to see more and more. Then I expect to see it continue to change. I think a lot of the traditional ways of doing that--you know, American College has been doing that for 90-plus years, and you'd send out textbooks and you'd actually take your exams on these paper things and mail them back in back in the original days. And that was really a very early distance program. And I think the world's trying to catch up to, "How do we train people more on demand?" And I think that's a big challenge just moving forward. How do we get really good on-demand training and education that also keeps pace with time? Because I helped build a program earlier this year, and I think we've had three major tax law changes since then. That's a lot of effort that went into kind of a static program that all of a sudden can't adjust to the changing dynamics of the world. So, as we see things, the needs of people change, I think that training and education will change along with it.

Ptak: Where do you see some of the biggest gaps, whether it's skills or knowledge, that really matter to clients, maybe if you can give an example or two where you and some of your clients have been really focused?

Hopkins: I can talk about where I've seen it on my side and also where I see it in the broader profession, too. When we look at a lot of our clients, we kind of break things down into 80/20, right? So, we've got our 80% client, which is our mass-affluent, middle-America-up client. And then, we've got our 20%, which is more of our high-net-worth client. One of the areas that I've been noticing in the high-net-worth space is a need for more charitable planning.

Advisors kind of don't know the ins and outs of foundations, of 501(c)(3)s, of charitable work. And that's an area over the last two, three years that I've spent more and more time just honing my own skills to help advisors, because that's that 20%. That's the high-net-worth clients. They're really interested in that. I had a meeting. I was down in Texas this last year and we had three prospects in the room for this advisor. They were all good friends of his. They went to the same golf club, and that's where we were having this dinner, and that's what resonated with all three. I mean, these were ultra-high-net-worth clients. And I do know after that, we basically went through different charitable techniques. And that's what I was there to talk about from the planning side. And I know that those people moved forward with him, because that's what they were really interested in is that next-level meaningful impact. And I think that's an area that advisors are going to start recognizing for that high-net-worth [client].

Now, when you get to more-average Americans, what are some of the things there? I think this is something that's being highlighted out there, but I keep saying we're pretty much in the awareness phase of it, which is just all the behavioral finance pieces. How do we get people to just make smart decisions or informed decisions? And that's a really challenging thing. We've seen that challenge through this pandemic. I mean, we've seen people move to all cash, people trying to time the market--just so much uncertainty is causing all types of, from an academic standpoint, interesting behaviors. But that's an area that I think advisors and clients need a lot of help with moving forward. And I think where we are on the research and practitioner side of that is we're in the early awareness. We kind of know it exists. But to be honest, I don't even think most of the professionals or even academics know all the right things to do yet. We're still learning constantly there. So, I expect that to be an area that we see constant improvements on over the years to come. Some of the things that we used to think worked in the past might not work. And I think we have to keep challenging ourselves there to get better and better.

Benz: That was a question, Jamie, that we had for you was that idea of all those behavioral foibles and traps that everyone writes about and talks about. Jeff and I had a conversation with Michael Kitces where he pointed out that the advisor industry really needs to get beyond that sort of identifying mistakes mode and get into behavior change with clients. Do you have any thoughts or any sort of resources that you direct advisors to if they want to try to hone their skills and help their clients actually avoid some of these behavioral mistakes?

Hopkins: That's a great question. And Michael writes about it a lot, too. I think for advisors, if you're thinking of training, there's a couple of programs out there. There's one that Dr. Brad Klontz and his brother run at Creighton University, which is an excellent program, and that goes a little bit further into what things can you actually put in place to help modify behavior, or at least put in a framework of guardrails to help people make better decisions. And I've started to view it as two different things. And one of them is this idea of putting guardrails in place for somebody.

So, if you go back to some of Shlomo Benartzi's research, they had this save-for-the-future type of campaign that they rolled out, and eventually that became automatic enrollment and auto escalation, which a lot of the things that they looked at was you still have to give people a choice, though, right? They have to feel that they're making a choice. That's the ability to opt out of automatic enrollment, and then people don't, but they still have that choice. And I think a lot of advisors struggle with that idea of giving people a choice where they want to advise. I ran into that literally this morning, where the advisor just wants to tell the client what to do. And I'm like, well, lay it out and let them pick because there's trade-offs on both sides, whether it's liquidity, that's what you're trading off and what you're getting in return is more income. But to some degree, there's not necessarily a right answer there. It's what the client sees as valuable.

The other thing is, I've written a couple of times this year, there was this notion that we have to get emotions out of investing and get emotions out of personal finance. And I'm of the opinion that I don't think that's a super helpful statement. The reality is everything is emotional. And our brain to some degree craves emotional data. Actually, there's a good amount of research that says that our brains make better, more healthy decisions when we do include emotions in it. But again, it's putting the right guardrails in place. So, we stay focused on the long-run picture instead of getting distracted by short-term things.

I do think client experience portals, the way we explain information, all of those things can be improved. I wrote an article published in Kiplinger last year, which I brought up the idea that there's a good argument to be made that we've been explaining the benefits of deferring Social Security completely wrong, and we could talk about that as a very concrete example. Now, I haven't tested this from a client perspective. Does it work? I've done it to rooms of people in presentations, and it seems to resonate. But it's kind of just an interesting thing. Christine, this is something you'll be very aware of, which is, advisors go out and they say, "Hey, defer Social Security past full retirement age and get an 8% increase in benefits." That's the number one way they probably explain it.

And if you take some of the research around loss aversion, what are you actually telling somebody to do? You're telling somebody to take on risk to get a return. The risk is--what do most people worry about? Well, two things: With Social Security, it's that the program is going to run out of money, or two, that they're going to die early. And those are the two pieces of risk you're telling them to take on for return. Well, a risk-averse person doesn't necessarily like taking on risk for a return, right? What will they do? They will actually do the opposite. They're OK taking on risk to avoid loss.

Probably a better way to explain it is just simply a slight change of your words. But it's talking about what you give up if you claim early, and you can kind of go into that and show, "Here's the present value difference if you live to 90 and what you lose by claiming early." And the reality is we know that the way we describe something from a gain or loss to people has a big impact. And I don't think most advisors think through that yet when they look at, "Is my client risk averse or risk tolerant?" And I think that's a very basic example, and almost every advisor I know does the same thing. They say take on risk to get a return with Social Security. The reality is most of their clients might be risk averse, and you're telling them to take on risk for a gain, which they don't like to do. So, I think that's a very basic example of some of those things we'll find out as we move forward: Can we get better at helping clients make the right decisions by framing up the conversation correctly?

Benz: That question of choice is so interesting. Jeff and I had a conversation a few weeks ago with Jonathan Guyton, the financial planner. And he talked about using a discretionary fund with his clients where he really gives them some level of control over a portion of the portfolio. Does that type of approach make sense to you?

Hopkins: Yeah, I think it does probably for a lot of clients. I've helped advisors do this before with certain clients. We had a client that came in and was telling us their story--you sit and you listen--and just talked about all the different companies he had started over the years with his wife, too, they were both there, and both start their own businesses. And they're definitely stock-pickers, when they see something they think is going to be great. And they've been doing that for 40 years. And look, you have to give this person the opportunity to have their own discretionary outside fund and just go pick things. That's their spirit, their mentality, and it's going to make them feel less inclined to come mess with the other side. And I think that's one of those benefits of having something like that, this discretionary [fund], it gives them that choice to go invest and play in the market. Like Tom Hegna has a thing about that, too, which is his Paychecks and Playchecks. And it's a similar concept: Here's your secure piece, we'll take care of that with our investment portfolio, but then your playcheck can be your discretionary one. And that can be your investment assets, and you can decide what you do with that. And often that perception of choice there might make them feel more at ease with the overall plan. So, I like that idea. I don't know if every client, you can give them a large enough pool, but maybe even for some people if they just have $1,000 or $2,000 that they play with in their Robinhood account or whatever account it might be with nowadays, it still might make them feel that sense of choice, that they are kind of involved.

Ptak: Then on the other end of the spectrum, there are those who maybe aren't in a position to have a discretionary fund because they've never really had a plan and they're hurtling towards retirement and feeling like they have to play catch-up. Can you talk about sort of how it is you would work with an advisor, maybe from an emotional behavioral standpoint, to manage clients like those to help them to address some of the shortfalls in their plan and address them in a more orderly way than perhaps they otherwise would if they allow emotions to take hold?

Hopkins: I think another thing to recognize on that side is, a lot of what we think of advisors, they have a limited number of those people in their portfolio of clients, right? Why I came into this industry and profession is, you know, it's kind of a family story. My mom is in her late 60s now and my dad passed away when I was 8, and neither one of them graduated college and they're running a construction company together. My dad passed away on a job site, an accident there, fell off a roof. And all of a sudden, my mom's got a bunch of kids, never graduated college, and is running a construction company without the person that does all the work. Well, fast forward, she got all five of her kids through college, three of us with graduate degrees of some type now, and she's in her late 60s, still working, but has never been part of a pension program. Never had a 401(k) or any type of IRA savings, and you get there, and she's almost paid off her mortgage and will be heavily reliant on Social Security and Medicare. And that's kind of America, right? That's what middle America is going to be, you know, maybe get their mortgage paid off nowadays and very reliant on two very important government programs.

And so, a lot of it is making sure that the idea of "if you can work longer." I mean, I think that's one of the more powerful things out there is, can we keep people in the workforce by keeping their skills up to date, framing their decision to retire on, "can you scale back?" There was some really good research done around this, too. But I thought of this concept, and sometimes I bring it up with my mom, too, is, "Can you work another year longer?" And she is, "I really want time off." I'm like, well, take a month off. That's OK. Spend that money, because working another year longer is worth like spending $5,000-$10,000 this year on a vacation. And it's actually the opposite of what a lot of people do when they start nearing retirement, and probably every advisor out there has seen this, they get that client who doesn't necessarily have enough to retire, and the year or two before they decide they're retiring, they decide to really button-down, right? They're like, "Well, we're really going to cut expenses for the next two years because we're about to retire."

Well, reality is, you actually might be better off spending more, going on nicer vacations and staying in the workplace one year longer or six months longer. I think that's a really important piece of the conversation that advisors need to have: What is the right time to retire, helping them make quality decisions around Medicare, which is not just lowest premium is the best option, making very smart and educated decisions around Social Security claiming because that's going to be for two thirds of Americans in retirement roughly their largest source of income.

When we get down to the basics, there's three things: It's when to retire, making a good Social Security decision, and then a smart Medicare decision. If we can make those three things in an informed way, that's the majority of what middle America needs to deal with. So, if advisors just keep laying that out and having those conversations about what can we do to stay in the workplace--and I don't think a lot of advisors do. They hear, "You want to retire?" Then their first thought is, "OK, let's look at what you can do to retire." And they don't want to necessarily say "no" and "why"--like, no, I don't think it's the best thing for you to retire and here's why and then show the impact of working six months, eight months, nine months, a year longer. And you don't have to fundamentally change their entire goal. But give them that option, show him what it might look like, and show him what it might look like to spend $5,000 this year to go on vacation if you commit to six more months in the workplace.

Benz: Speaking of working longer, what do you think the implications of the pandemic will be for older adults whose plan was perhaps to work longer?

Hopkins: The pandemic throws a lot of problems out there. Now, I can tell you some of my thoughts, but that's probably about all they're worth right now. I am very pessimistic as it comes to this, and I'm pretty much known for that around our workplace. A lot of people call me Dr. Doom as it comes to the pandemic, and I've been pretty negative around it all year. I think we're at 13- or 14-straight weeks, maybe of a million-plus first-time unemployment initial claims. We'll see if that changes after the end of July as the federal funding, the additional unemployment benefit, runs up, at least as current law is written. But I think it's going to be very hard, which it already was very hard for a lot of senior workplace employees to find continued employment. And we've had issues with workplace discrimination in our country for a long time. And I think that the pandemic is actually going to make that harder. I don't think it's going to make it easier.

But I do think it will open up the door for more part-time, more distance work, which is a trade-off: What if you could work from home and part-time, would you be able to stay in the workplace a little bit longer? Maybe. Obviously, that brings technology challenges to some of our older employees. But I think so far from the pandemic that we've probably gotten better at that. So, I think it will be a plus and a minus. But my gut feeling is this will not be truly beneficial for those nearing retirement. I think a lot of them if they lose their job, at least for part-time, will choose not to go back in. We kind of saw this in '08-'09 where some of the senior close-to-retirement-age population, if you lost your job, you just retired, you didn't go look for another one. And it did force some earlier claiming of Social Security, and we saw the May data seems to imply that, but there could be some other factors going on there. So, we'll wait and see how the rest of the year goes. But my gut feeling is we'll continue to see some improvements in the ability for older Americans to continue to work from a distance aspect, and I think autonomous vehicles helps that, too, to be honest. Mobility is often an issue for older workers. But I expect this to be a net negative at least in the short run.

Ptak: One outgrowth of the pandemic is that yields are seemingly as low as they can go on safe securities. Is that mainly a concern for people who are in drawdown mode? Or is it an issue for retirement savers as well?

Hopkins: It's an issue for a lot of people. Retirement savers, too. As you start dealing with that group looking at retirement income, and they're 55 years old, and they're thinking they may be 10, 12 years from retirement, and they do want to start thinking about derisking a portfolio a little bit, because there's, again, some good research out there that suggests that five years right before and right after retirement are your biggest concerns from a sequencing standpoint, that they want to derisk. Well, all of a sudden, derisking doesn't look very attractive right now with, as you said, interest rates basically at zero and negative. And somebody's saying, "Why am I going to pull money out of the market to put into anything that's paying zero or negative? I'm just not going to do it." We 100% run into clients like that now that are probably, in my opinion, starting to get overweighted in the market, because they don't feel that they have a good, safe investment or safer investment-style option.

And I've had some concerns, too, with that group and the retirement-income-drawdown group on being in bond funds. And people can argue about this back and forth. And again, I don't always necessarily think there's a right answer, but there's things to consider. But we saw some bond funds through the pandemic--we were looking at some on a Friday back in March or April that lost over 20% of their value in a single day. We just had this pulldown in bond funds. And we've been talking about that for years, and academics talk about it, and investment specialists talk about it: Bond funds are not bonds. But the reality is a lot of people's investment portfolios were made of bond funds. And as you had these liquidity draws--and then they're essentially selling out of bonds and buying new bonds at low rates--these bond funds were just getting crushed. And you have the person who was doing what they were supposed to do and not selling that was being harmed in that case, because that was supposed to be their safe investment allocation, all of a sudden, it's down 20%. And then that person is saying, "Why am I in my safe investment losing 20% when I might as well just be in the market for the upside?" And we had people come to us with that conversation, too. And insurance products, which would have been nice to buy into probably in the fall, you know, a lot of their interest rates now is tied to the overall Fed rates too have come down, and I don't think there's a lot of appealing options out there for people today. And that's a true challenge of where are you going to be properly allocated today if you do need returns, either you're still saving or your returns from an income-generation-drawdown perspective.

Benz: Let's discuss that from the standpoint of withdrawal rates. It sounds like you would probably be in the camp that because of yields being so low that at least new retirees should be more conservative in terms of setting their initial withdrawal rate. Is that how you would come down on that question?

Hopkins: Yeah, I think so. I struggle with this one, too, because one thing we do know is when markets and things come down, we tend to see a higher withdrawal rate possible over time. It's kind of the opposite of what's expected because if you have big drawdowns, you actually tend to see rises. And you don't want to say this time is different. But I do think depending on how you're invested, you do have to just be conservative with that withdrawal rate. I, however, don't fall so far onto the one side as, you know, my colleague Wade [Pfau] has I think since 2010 or 2012 been publishing about how the 4% rule might not work. The reality is, since that study was published, probably for six, seven, eight years, it probably did work, because you retest five, six, seven years, in and you made it through that time period. And essentially the markets carried through those time periods. And there's some people on the flip side that believed the market might carry through low safe yields, too.

I don't know. Personally, I tend to say you need to lower that. I would like to be below 4% today. But I can't necessarily say that's going to be right or wrong. And I think that gets back to are you willing to cut back. I think that looking at withdrawal rates is helpful, but again, it doesn't have to be the driver. The 4% rule, which in the retirement-income space we talk about so much, wasn't designed to be a retirement-income strategy originally, and it's helpful guidance, but it's not the be all and end all of things.

I've actually fallen more and more into the camp over the years of making sure that you have that floor of income. And that's where I get even with bond funds and bonds. I care less about the actual returns of everything, but looking at cash flow throughout retirement, and saying, "What is the cash flow going to look like?" So, can we meet your spending needs each and every year, then great. Most people if they came to you for retirement advice, and you said, "Hey, look, we can solve all of your cash flow needs for all of retirement," they'd be great. They don't care if it's a 4.5% withdrawal or a 3.8% withdrawal or a 5.0% withdrawal. If you can meet the spending needs, you can meet the spending needs. Now, the spending needs for people vary because some want to grow their wealth, some want to spend it down. But I think that's really where you have to get to. So, I still look at things today--I know you've mentioned some of Guyton's research and you have other people looking at should you replace some of your bond portfolio with fixed income, SPIAs or DIAs on the annuity side--and that can actually help move up your payout rate and withdrawal rate at this point, too.

Ptak: Now, can you expand on that? You've written positively about the role annuities can play as a component of a retirement plan. Are annuities even more attractive in this current era of low yields, and what kinds do you tend to gravitate towards?

Hopkins: From a retirement-income perspective, I like three different types of annuities, which would be single premium immediate annuities, if you just want that lifetime floor of income; a deferred income annuity, and really my view there is just look at the payout rates and see where we can get a better deal, and that really should be our deciding factor between the two, but DIAs play a nice role deferring income out a little bit and, again, creating a floor of more secure income.

Lately, probably for the last maybe three or four years, I've been just more interested in the fixed-indexed annuities. And sometimes I say equity indexed, and one of my friends, Cheryl Moore, always gets mad at me that she doesn't want me to call them that, but a lot of regulators still call them that, so sometimes I still use the term--but fixed-indexed annuities. And there's been good research – Roger Ibbotson there, too, has talked about this--that if you think about them as replacing the bond portion of your portfolio, they can essentially help you provide a higher payout and return over time than your bonds and CDs can. And so, I've really fallen into that category of thinking, which is take some of your safe investments and just see can you get a better return from an insurance product. And if the answer is yes, then does it make sense to replace that portion?

And that's a big change from how those products are sold, though. So, if you see the steak dinners where they're selling fixed-indexed annuities, it's this whole sales pitch around "be part of the market" and "no downside." There's a zero cap on the floor and you get to participate in most of the ride of the market. And it's kind of getting the whole thing wrong. Yes, some of those things are true, but really they perform historically closer to but a little bit better than CDs and bonds. So, to me, that's where I start thinking about the way that these products are sold and positioned today doesn't align with really where they fit into a retirement-income plan. So, I like seeing those, especially if you're trying to do a bucketing approach. First-year cash equivalents is easy; that middle bucket is the hard part. And that's really the whole challenge about bucketing is that a lot of people go three buckets, it's not subject to that--but three buckets: your short-term needs, midterm, and long-term. And that midterm is the challenging one, and I like FIAs in that bucket, filling in that midterm role, allowing your equities and growth portfolios to sit out a little bit longer.

Benz: How about advisor sentiment toward annuities? Do you sense that that's changing? Because, historically, there's been sort of this cultural bifurcation where you're either an insurance person or you're an investments person. Do you sense that's maybe changing a little bit?

Hopkins: It's kind of a weird thing. I get asked that a lot. And as soon as people ask me, I'm like, "Yeah, it's definitely changing," because I feel that this conversation has opened up a lot. But then when you go look at the annuity sales side, it doesn't look like it's changed all that much. I do think that the sentiment towards them has improved. I think that there's a lot of advisors that are aware that there are uses of annuities in plans, and I think that's where maybe 5-10 years ago, you got more CFPs and advisors, especially in the AUM model side saying, "Oh, we'd never use an annuity, they're terrible." Fast forward, I think you say, "Yeah, there's definitely good uses of annuities, but we don't really use them that much." And so, I don't think the behavior has changed a whole lot. But I do think the recognition around the research from a retirement-income standpoint, I think, that has made an impact. If you look at the data, variable annuities have been on a decline for probably more than a decade now. And some of the fixed products have seen an uptick.

But when we then get back to the really short answer is, to be honest, most advisors do things and recommend things that are squarely within how they get paid, that if you're the insurance side, what did you do you? You recommended things that you got commissions off of. And if you were on the AUM side, you didn't recommend anything that took AUM, assets under management, away from you. And yes, the media, and yes, people like ourselves talk about true fee-only planners a lot, but I think it's something less than 5% of whole advice world. So, it's a small subset to be honest of the impact out there is coming from just a, hey, here's a flat fee or hourly fee. It's a very small percentage of the overall population.

So, I see it all the time where an annuity would make perfect sense, and the advisor won't do it because they can't get clearly paid on it. I see it with rollovers probably most disturbingly so, and you see that on both sides. I just saw one recently. It was about a 5.9% payout, very solid payout from an annuity for a 62-year-old woman, much better than anything you could purchase on the market today. The advisor is still very much of the mindset they need to bring the assets over and really not a whole lot of numbers behind it, but very clear that the idea was either this is going to be a payout from a government plan and I will charge nothing on it or we do a lump sum rollover and I'll manage it. And that's unfortunately still the driver for a lot of people.

Sometimes I think the advisory world actually gets too much criticism around this. This is how people behave in every profession: Your compensation drives your decision-making. It has an impact. That's why people get paid to do things, because we know that payment does change how you do something. It's why commissions, it's why sales quotas, it's why everything from a financial standpoint is out there, because it drives behavior to some degree. So, it's not only an issue for our profession, but it is a big driver when it comes to the usage of annuities and retirement-income planning.

Ptak: I wanted to shift and talk about withdrawals and specifically the CARES Act. You've been doing a lot of work in the CARES Act, which makes it easier for retirement plan participants to gain access to their funds. Before we go into the specifics of that, where do you come down philosophically on the question of how much access people should have to their retirement funds? On the one hand, urgent financial needs are just that, but on the other, most people in this country are undersaved for retirement to begin with.

Hopkins: I think the whole idea of leakage from plans fundamentally is a concern. What we don't want to see is people using retirement assets for everything else under the sun. That being said, I also think it's important to recognize that our lower-income, middle-income individuals might not have as many other options. Finally, the CARES Act is something that I don't know why it took so long to get this, but just the ability to put the money back in. I mean, we kind of had this sense, "If you take your retirement money out, we might give you some type of exemption so you can use it, but we'll never let you save it again." I think the idea of loans and repaying them to yourself, that makes a lot of sense, and I definitely fall into that category. I would probably modify more things to allow hardship-style loans from IRAs. I think that there's some common-sense changes we can make to IRAs that we learn from the 401(k) market and employer market, and we just haven't made those decisions.

I probably said a lot of things there. The simple answer is I do worry a lot about leakage from retirement assets. But I think we have to recognize that a lot of people don't have access to other funds. So, is it great when we see people are saving for retirement but are carrying monthly credit card debt? I think the answer is no, they might actually not be helping themselves. Especially in a time like now, recognizing that people are losing their jobs and giving them access with the ability to put the money back in over time is probably a good public policy.

Benz: You mentioned that you would support the idea of putting some of the features of 401(k) plans over to the IRA environment. What might those be?

Hopkins: The biggest one is just getting rid of these income limits in the sense of $5,000, $6,000. That's one of the things that makes the least amount of sense to me. So, you're middle-income, making $70,000, $80,000 a year. You can't even put 10% of your savings into an IRA. But if you had a job at a 401(k), you could put twice as much in. That to me is just kind of a misalignment. I think that we have to recognize that, especially as IRAs today are probably going to become and have become, to some degree, the savings vehicle for a lot of our self-employed small-business owners that are out there. And so, I think just aligning those across the board and saying you can put $57,000 into a traditional IRA and aligning that with 401(k)s so we're not just getting people who make a million dollars a year max funding both of them. And again, there's alignment there already. If you're an active participant based off your income levels, it phases out, at least for the deductibility portion. That's a very simple one. Just recognize that we have a lot of people who are not in workplace plans, and they need a better place to save.

We've always recognized that at the employer level, 401(k) loans are a positive thing. Well, let's have IRA-level loans, too. Obviously, there's some other concerns just about abuse there. I think with a lot of things on abuse, the way that people view it is wealthy people taking advantage of tax breaks to just further increase their wealth. You can always put income caps on certain things if that's your concern, or you could even put wealth caps on. If you have a $6 million IRA, sure, you can put some limitations on that. I would like to see IRAs looking more in the sense of true retirement-funding vehicles instead of really what they are today: rollover vehicles.

Ptak: When the market was down a lot more, there was a lot of chatter about this being a good time for people to take a look at IRA conversions. Have they missed their opportunity now that things have come back?

Hopkins: It is a good thing to bring up, right? If the market drops, it's a great time to convert. However, essentially what you're trying to get into there is some type of market-timing. So, yes, if you believe your assets are depreciated in value, is it a good time to convert? Probably. I still think 2020 is a fantastic time to do Roth conversions. But it should be up to the individual. What I always do with people is I just ask them some very basic questions about this. I say, looking out at the world today, do you believe that your tax rates are going to go up in the future or down? Just ask people that. And you know what? Very few people believe that tax rates are going down in the future. They didn't believe that earlier this year, and I'm sure with the CARES Act and $6 trillion being pumped into the economy and federal deficits, it's very hard to look out there and believe that tax rates are going to keep going down in the future. In fact, even if you just base your answer off the current law today, the Tax Cuts and Jobs Act goes away at the end of 2025. And you go back to, for most people, higher effective taxes.

So, when should you do conversions? You should do conversions when your tax rates are lower when you're converting than when you pull the money out in the future. So, to me, I think that is probably the main driver for most people. I'm a believer for sure that tax rates are going up in the future. I just don't see how long term the country can continue to run a deficit as it does with low tax rates, less revenue coming in. I think that should be a big driver.

I think all things being equal today, Roth IRAs are typically better than traditional IRAs. Roth money is better. You don't have RMDs at age 72. Under the SECURE Act, this 10-year stretch provision, it's clear you'd much rather have a Roth than a traditional IRA if you inherit. So, from an estate and beneficiary planning standpoint, it's beneficial. From Social Security and Medicare premiums and taxes, it appears to be better. So, there's a lot of benefits today for Roth. But I think from an advisor and recommendation standpoint, one, you can always ask your client that they can make the decision. But two, I think probably for advisors it should come down to tax diversification, which is just a lot of your clients are going to have most of their money in tax-deferred retirement accounts, meaning that they're very subject to changes in future tax laws, not just rates, but tax laws. They essentially have one tax vehicle, and as laws change, it will impact them positively or negatively more on both sides. So, from a diversification standpoint, I think it's great to have Roth money, so to do conversions to get it there, great. To have tax-deferred money, good. And to have just total aftertax money, also good. That's really where we want to get clients if we can do true planning there.

Benz: Another aspect of the CARES Act was the suspension of required minimum distributions. Do you think it makes sense for Congress to write legislation that would automatically trigger a suspension if stocks dropped below a certain percentage in a given year rather than having to patch things together at the last minute in the midst of a crisis?

Hopkins: That's a really good question. I haven't thought much about this suspension based on market drops. To be very honest, I'm actually not a huge fan of the suspension of RMDs. And I'll tell you why. The reality is the vast majority of retirees need their distributions anyways. I think less than a quarter or 20% or so don't take out more than their RMD each year. So, the reality is that the suspension of RMDs essentially helps a group of people who don't need the income that are trying to grow their wealth in retirement. And that's OK. That's our 20%, our higher-net-worth client base. But typically what I think on public policy, I'm usually more concerned with the 80%. And the RMD amount is a good spending measurement. So, contrary to most advisors not wanting to hear this, I think they should expand RMDs out a little bit, include Roth IRAs, too. I know that doesn't get a lot of favor with advisors when they're like, "But you just told us one of your favorite things is that they don't get RMDs." Yes, it's a very good feature. But I like RMDs. I think it's a very good tool for a lot of retirees. But the notion of if we have 40% drawdowns in the market, is it a good year to pull out your money? No. But I think that should get to those people who have enough income to understand where your income is coming from each year and to still have flexibility to not have to sell out of the market during those years to provide your retirement cash flow. And I think that gets back to planning, not so much should we have a taxable distribution from a retirement account. A lot of people could just buy back in if they didn't need to spend the money anyways.

Benz: One question for you, Jamie, about the CARES Act was that until very recently there was major confusion about people who took their required minimum distributions earlier in the year and whether they would have the opportunity to put it back now. It seems that that's solved, and they can do that until the end of August. But I guess the question is why was that so complicated? And do you think it was just an indication that the legislation was kind of a mad scramble there in the midst of the crisis?

Hopkins: The CARES Act looks like it was drafted in two weeks. And it's because it was drafted in two weeks. It's been the perfect example of building a plane while you're flying or learning how to fly when you're already in the air. We're getting so many retroactive changes to things. This one I thought was unnecessarily complicated, that it just took so long to get a simple solve in place. And there's some real questions about the solve, too. I could go into that for a second here. So, essentially, they waive RMDs for the year, but it's end of March--March 27, I think, when the CARES Act passed, which means a lot of people were taking monthly distributions in January, February, March. Some people just take all of their distribution out in January. January actually became really the problem area. And then, eventually, we got this IRS notice, I think 2020-51, and that went ahead and said, "Hey, look, we extended the 60-day rollover all the way out to the end of August and this won't count against the once-every-12-month IRA 60-day rollover rule." OK, solve in place.

Additionally, they said that you can go ahead and do rollovers from inherited accounts if you took the RMD during that time, too. And it's something Jeff Levine and I have talked about. To some degree, we're not sure the IRS should have fixed this in the way that they did. We're probably both in favor of this being fixed. We get a lot of questions about "How do I fix my January distribution? Because I was proactive, and I'm now getting punished for not waiting longer to take my RMD out." But the reality is there's very clear rules regarding rollovers. There's very clear rules that rollovers from inherited accounts are not allowed from Congress. And so, to some degree, we've entered a slippery slope. I'm an attorney, and what you don't like seeing is just because something feels right, it shouldn't have regulations overturning very clear congressional laws. So, Jeff and I have talked about that. We're both kind of like, "Hey, we're glad that the outcome is there." But honestly, Congress should fix this if it's a problem, because we really should not get into the world of just having regulatory changes because they don't like something that Congress had passed. They passed a new bill, but they chose not to make those changes. And the Heroes Act did have some of those changes in it. So, they proposed a new bill in the House, got to the Senate, still stuck. But that bill was supposed to deal with this RMD aspect. I do think there's some clear questions here of whether or not the IRS overstepped in its rule-making. I don't know who's harmed by it, so I don't really know who would challenge that. But I think there are some real clear questions there because I don't see how they have the authority to allow rollovers from inherited accounts when they're clearly prohibited.

Ptak: Maybe in our last question we will widen out a bit. We had a great conversation with Carl Richards a few months ago. And, as you know, a big focus of his is that advisors should help clients in a more holistic way to align their time and money with their life's goals. Do you agree that this will be a big part of the future of advice, financial advisor as life coach, so to speak?

Hopkins: I do agree with that. One of the first things I helped work on when I got to Carson Group a year-and-a-half ago was part of the client experience portal. And one of those things is a timeline of events, essentially all the things that the advisor helped with over the course of their relationship, and that being part of one of the documents that's produced for every client review. Because so many client reviews get focused on, "here's the investment returns," and the reality is, the advisor has no impact on the investment returns. So, how well the client review goes is based on the market, which you have no control over. But what you did have control over is, your kid went to this college, we helped fund this 529. Great. We refinanced the house at this time. Great. Getting that more holistic view of someone's life and the lifecycle of finance and helping them save in times of abundance, plan for the future, and really focus on those life events, I think, is very important.

That's going to drive better behavior, too. Going back to one of the earlier pieces is when people can envision their future self and future decisions, they tend to make more informed stay-to-path plan type of decisions a little bit better. That's some research out of UCLA about the future self from a couple years ago that's really powerful. And I think a lot of what Carl talks about there is going to be true. There's definitely a move towards this more-holistic planning out there. That's true. I've worked with a lot of the largest insurance providers and multilines for many years, and even in those places, which have been more product-centric, they're continuing to move forward towards more-holistic planning to get those agents and advisors to think more holistic. CFPs definitely enter that mindset of trying to think more holistic, asset managers adding all types of different technology and services to think more holistic--and that's where we have to go. If you just think about it from the selfish standpoint, people want to keep their clients for life, not one-off transactions. So, they want to keep them through the accumulation, through the nearing retirement, and through the decumulation. And so, a more holistic approach will help them better serve the client across all of those different life cycles.

Ptak: Well, Jamie, we've really enjoyed this conversation. Thanks so much for your time and insights and sharing them with our listeners. We really appreciate it.

Hopkins: Jeff and Christine, thank you so much for having me on the show. I've been listening to it many times. So, it's a pleasure actually being on myself.

Benz: Jamie, thank you so much.

Ptak: Thanks for joining us on The Long View. If you liked what you heard, please subscribe to and rate The Long View from Morningstar on iTunes, Google Play, Spotify, or wherever you get your podcasts.

Benz: You can follow us on Twitter @Christine_Benz.

Ptak: And at @Syouth1, which is, S-Y-O-U-T-H and the number 1.

Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us at Until next time, thanks for joining us.

(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. Morningstar and its affiliates are not affiliated with this guest or his or her business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with and governed by the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis or opinions or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)

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