Whitepaper: Traditional Retirement Planning Approaches May be Outdated & Ineffective

Dunham & Associates Publishes Study Showing the Mathematical Flaw in Conservative Retirement Planning

Industry Needs to Reconceptualize Retirement Planning to Address the One-Two Punch Delivered by Longer Lifespans & Inflation on Retirees' Savings

SAN DIEGO, Feb. 19, 2025 /PRNewswire/ -- Dunham & Associates Investment Counsel, Inc. ("Dunham") has published a new whitepaper asking, "Is Our Industry Prepared for Retirees' Longer Lifespans?" Dunham's research finds that, while the average American lifespan continues to increase, the portfolio allocations and withdrawal rates recommended by investment firms could leave retirees financially destitute if they live to be over 100 years old.

The whitepaper explores how various scientists believe that, in the future, humans could live to 150. But according to Dunham's research in the whitepaper, a couple retiring with $1 million could, during 50 years in retirement, spend $2.7 million on food alone.

"We as a society are at a critical juncture. Medical advances are promising unprecedented, unimagined longevity—but at the same time, persistent inflation will threaten purchasing power during the longer retirements that Americans may be able to enjoy," said Salvatore M. Capizzi, Executive Vice President of Dunham, and author of the whitepaper. "If the financial services industry does not fundamentally reimagine its approach to retirement planning, we as a whole may risk failing multiple generations of retirees."

To learn more about the whitepaper and its content, please visit https://www.dunham.com/FA/Blog/Posts/retirement-crisis-longevity-inflation.

The Extent of the Problem

The whitepaper provides a comprehensive mathematical framework for helping financial professionals understand how increased longevity and inflation combine to create unprecedented retirement planning challenges. The paradigm-shifting concepts introduced in the study include:

• Longevity-Inflation Impact: Two forces—living longer and inflation—can deteriorate retirement income. This relationship explains why portfolios that appear to be adequately funded under traditional planning norms can fail decades earlier than expected.
• Multi-Generation Retirement™: An emerging phenomenon whereby retirees may need to support three generations at once—themselves, their parents, and their grandparents—due to increases in life expectancy.
• Retirement Investment Paradox™: Traditionally lower risk portfolios may actually increase the risk of failure over extended retirements. Under traditional retirement planning strategies, the mixture of inflation, increased longevity (up to 40 years or longer in retirement), and sequence risk at the same time could solve for one of those challenges, while amplifying the risk of the others.
• Target Sustainability Rate: A novel framework explained by Dunham—the minimum rates of return required for portfolio sustainability across different inflation scenarios. In the whitepaper, Dunham's research demonstrates why typical "conservative" returns of 4% to 5% may be inadequate for retirees to meet expenses during extended retirements.

What The Industry Can Do

In light of the ongoing trends which have been highlighted, the whitepaper also offers potential solutions for how the wealth and investment management sector can reimagine approaches to retirement planning. For example:

• Financial advisors can adopt an Adaptive Financial Oversight framework which treats retirement like running a personal finance company, where the retiree is CEO and the advisor is CFO.
• The Retirement Real Return Rule finds that portfolios may need to maintain a spread of 4% to 5% above inflation to remain sustainable across extended retirements. Retirees and their advisors could accomplish this by addressing short-term volatility through tactical overlay strategies, while simultaneously focusing on long-term growth.
• In addition, retirees and their advisors could maintain sustainable portfolios by adopting a Purpose-Oriented Portfolio Strategy, whereby traditional bucket approaches are replaced with four distinct portfolios (Distribution, Flex, Healthcare, and Legacy).

"What our industry has labeled 'prudent' retirement planning could actually be systematically undermining the financial security of retirees, and the problem becomes even more urgent as life expectancies increase," said Mr. Capizzi. "However, our whitepaper lays out the practical solutions that financial advisors and their clients in or nearing retirement can take right now to evaluate if their portfolios can support themselves, and their parents and potentially grandparents, for as long as necessary."

To download the Dunham whitepaper in its entirety, please click here.

About Dunham & Associates

Dunham & Associates Investment Counsel, Inc. with its affiliate Dunham Trust Company is an accessible wealth and trust management firm that has been challenging the industry's thinking for nearly four decades. The company's differentiated investment strategies and approaches are designed to strengthen the investment process with the goals of and striving to secure the best possible outcomes.

Financial advisors can utilize Dunham's client service and asset allocation programs to help optimize portfolio management. In addition to concierge back-office support, advisors can work with Dunham to create carefully engineered and well-balanced portfolios using innovative mutual fund strategies. The compensation of Dunham's sub-advisors is tied directly to the success of investments, in accordance with the firm's commitment to accessibility, accountability, and fairness.

To learn more, please visit https://www.dunham.com/.

Disclosures

This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.

Investments are subject to risks, including possible loss of principal. Investors should consider the investment objectives, risk factors, and expenses of any investment carefully before investing. Diversification does not guarantee profit or ensure against loss.

No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

Investors should consider the investment objectives, risk factors, charges, and expenses of the Dunham Funds carefully before investing. This and other important information is contained in the Dunham Funds' summary prospectus and/or prospectus, which may be obtained by contacting your financial advisor, or by calling toll free (800) 442‐4358. Please read prospectus materials carefully before investing or sending money. Investing involves risk, including possible loss of principal.

The Sub-Adviser receives a fulcrum fee, which will vary based on the Sub-Adviser's performance against the benchmark. The Sub­ Adviser is rewarded when performance exceed the benchmark and is penalized when performance is short of the benchmark. Some Sub-Advisers receive minimum compensation regardless of whether or not an established performance benchmark is met or exceeded.

Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/ Dealer. Member FINRA/ SIPC. Trust services offered through Dunham Trust Company, an affiliated Nevada Trust Company.

Media Contact:

JConnelly for Dunham & Associates
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SOURCE Dunham & Associates Investment Counsel, Inc.