Robert Merton Interview – Video

This post is a video post.  The video is an interview with Robert C. Merton who is the School of Management Distinguished Professor of Finance at the MIT Sloan School of Management.  Merton received the Alfred Nobel Memorial Prize in Economic Sciences in 1997 for a new method to determine the value of derivatives.  He discusses the growing challenge of supporting a long-term retirement which will be the norm going forward.

Robert C. Merton

Robert C. Merton

This longevity challenge is exasperated by the move by employers to have employees handle their own financial income in retirement.  He discusses how employers used to fund retirement plans called defined benefits (DB) plans which resulted in retired employees receiving a certain monthly income.

Now employers have moved to defined contribution plans which has employees saving for a lump sum which is theirs at retirement.  This change to defined contribution plans resulted in a requirement for employees to understand what income they will need in retirement and the appropriate investment choices for their retirement savings to provide the needed monthly income.

He discusses the importance of determining the goals that you have in retirement in order to deal with the 3 variables that will affect the outcome in retirement.  The variables for which individuals have some influence are saving more for retirement, working longer and/or taking more risk in your investment portfolio.  He discusses that trying to increase investment returns also comes with added uncertainty.

Click below for the 26 minute video conducted by The Journal of Retirement:

Robert Merton Interview

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About Dan Crimmins

Dan Crimmins, co-founder of Crimmins Wealth Management, is a financial coach and fee only financial planner. Have a financial question? ASK DAN

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