Retirement Optimizer with Greg Leroux | E253

Optimal Decumulation Patterns.

In today's episode of the Fintech Impact, we have Greg Leroux, founder of Retirement Optimizer. It is a Canadian software that optimizes your retirement specifically around strategies on drawing down your assets over time to ensure that you successfully make it to the finish line.

Episode Highlights

  • 0.42: In existing financial planning software, you enter a series of inputs regarding your assets, spending expectations and what you want your retirement to look like and what you have to fund that, says Greg. 

  • 0.55: As per Greg, the difference that we have at Retirement Optimizer is that we apply an optimization engine to the de cumulation side of things.

  • 1.35: The traditional rule of thumb approach to withdrawing money and retirements won't necessarily maximize your net estate value.

  • 2.56: Many clients ask, what should you be doing instead of the rule of thumb and the answer is there is no answer. Because it depends on lots of things and that's why when it comes to decumulation and retirements or in a game of chess, computers generally beat people, says Greg. 

  • 4.22: The number of variables involved in decumulation is enormous and to think that a human being is going to do this with a pencil and paper or even a spreadsheet correctly is pretty naïve, says Jason. 

  • 4.53: In any situation you are setting up with the spreadsheet, you are going to be making assumptions about the future, and your assumptions are by nature going to be wrong because we don't know what inflation is going to be over the next 30 years, says Greg. 

  • 6.02: Greg started with a company that was a performance reporting company to comply with CRM two requirements and allow people to look at their rates of return and benchmark them against common indices.

  • 7.21: Greg was originally contracted by a financial planning firm to build a suite of tools for them. And, once we actually had the solution working, they wanted to go into business with us and commercialize it more generally. 

  • 8.17: A specific approach we decided to take was to look at the assets that were most necessary and if it does turn out that you have lived your retirements, it's not one asset or asset class. It is the net estate value effectively, says Greg. 

  • 12.21: Computer says you have enough money to retire. It says that you might fall a little bit short if you were just using bucket approach of withdrawing assets. But that might not be where you're concerned. You might want to stretch things, says Greg. 

  • 13.18: As per Greg, the output of our system is a series of interactive graphs and tables on a computer screen. But many people who are retired and don't want to be staring at computer screens they can produce a report.

  • 14.11: There is a spreadsheet output also with the entire tax model and the optimal values placed into it and if people do want to play around with it, that's an option as well.

  • 17.00: Greg doesn't work under a subscription model like many financial planning pieces of software; instead, it's on a pay per use basis.

  • 18.56: As per Greg we are going in two directions right now. One is to make it even more user-friendly for the individual who doesn't necessarily have a financial planner. And other direction is to make it more complex for people who have crazy systems of accounts that include money that's offshore or overseas.

  • 22.44: Watching people and how the software helps them to take decision, keeps Greg motivated and energetic to what he is doing.

3 Key Points

  1. The majority of people who are entering retirements have real estate as a substantial fraction of their net worth, but they don't intend to live in the same house until the end of their retirement. They intend to downsize at some point.

  2. Greg shares his thoughts on conjunction of financial plan with other standard financial planning software. 

  3. Tech has been red hot industry for the last bunch of years, and it is really difficult even for highly skilled, highly compensated people to resist the siren song of California.

Tweetable Quotes

  • "Our objective function in the optimization is to maximize your net estate value at the end of your retirement because this is the most tax efficient money that you're going to have." – Greg

  • "When you get into complexities and the different possibilities or different decisions, it becomes really unrealistic for a human to be able to compute all that even with the very advanced spreadsheet." - Greg

  • "You can compare an optimized solution to something that rigidly follows a rule of thumb, or you can even slice and dice it and produce a plan, try and beat the computer effectively and see if it actually works out your way." - Greg

  • "I would like to see the industry evolving towards a computational stuff being handled by computers and human interaction being handled by humans." - Greg

  • "Attracting, retaining talent as long as possible is probably the biggest challenge." - Greg

Resources Mentioned

Fintech ImpactJason PereiraFintech