Get a Stronger Retirement Plan

Who knew we could glean financial insights from the World’s Strongest Man competition?

If you saw it recently, you know the winner was a 28-year-old Scot named Tom Stoltman—all 6’8” and 384 pounds of him. 

This year’s contest showed that if you ever have an 18-ton bus blocking your driveway, Tom’s your guy. Just give him a big rope and stand back. 

To say Tom is “strong” is an understatement. He’s a freak of nature. 

And yet, as powerful as Tom is, he’d never be able to out-pull a team of 100 guys with average strength.

And that’s where we find an unexpected bit of financial wisdom. 

In retirement planning, the “strong man” is usually considered investing in stocks. For the sake of example, let’s say you do that long-term and get a 10% return. 

In the next lane, picture 100 not-so-strong guys. In retirement planning terms, we could liken this team to the boring world of pension plans and fixed income bonds. For example’s sake, let’s say the long-term investment return here averages only 5%.

No contest, right? Ten percent beats 5% every time.

Except for this fact…If I am a retiree only using stock investments to generate my retirement income, I am, in effect, a pension plan of one person. Because I don’t know when I’m going to die, I have to plan for a long life.

And since I don’t want to run out of money before I die, I am forced to be conservative when it comes to withdrawing money each year from my nest egg. After all, I don’t want to deplete my retirement funds too quickly. 

Many experts, trying to strike a balance between productivity and safety, recommend that those following this “strong man” plan withdraw only 3% of their portfolio’s value each year. These low payout figures aren’t set in stone, but experts suggest them to avoid problems when markets are turbulent (like now).

This is where we see the advantage of a “weaker-but-bigger” team. Retirement planning as practiced by pension plans and insurance companies relies on actuarial science. That simply means “number-crunchers have calculated the average life expectancy of a large group of people.” 

In essence, your life expectancy gets pooled with that of 10,000 other people. The result is an average. It’s a way of acknowledging that for every retiree who lives to be 100, there will probably be another that only lives 100 days into retirement (that’s only an illustration, not an actual statistic). 

Because of the risk pooling afforded by these actuarial calculations, pension plans and insurance companies can pay out something called “mortality credits” to their retirees. They can promise every retiree a guaranteed payment of interest earned on the principal contributed by the retiree, plus a mortality credit.

What does this mean? Well, depending on the age and sex of the retiree—a pension plan or guaranteed income annuity issued by an insurance company may guarantee a 6% or 7% payout for life. How can a “weak” investment plan do this, when it averages only 5% in earnings?

The secret is not in the “strength” of the investment, but in the sheer numbers of investors participating in the pool. 

Of course, the numbers used here are only illustrative. You should consult your advisor for numbers that fit your specific situation.

In short, when planning for your own retirement, remember the lesson of Tom Stoltman. The strength in one (approach) is often impressive. But even greater strength is possible when you team up with others. You may benefit greatly by recruiting some (actuarial) help.

To help you think more about such issues, I’ve created a comprehensive checklist of pre-retirement questions for people who are 60-something. It’s free! Email me at, and I’ll send it to you right away.

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

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