Dr. Paul Kaplan: A Financial Plan For Your Entire Life | Rational Reminder 417

Meet with PWL Capital: https://pages.pwlcapital.com/en-ca/contact-us?utm_source=content&utm_medium=youtube&utm_campaign=rationalreminder_yt

Avoid Online Scams: https://pwlcapital.com/stay-safe-online/

In this episode, we are joined by Dr. Paul Kaplan, economist, CFA charterholder, former Director of Research at Morningstar Canada, and co-author of Lifetime Financial Advice, for a fascinating exploration of life cycle finance. Drawing on decades of research in economics, portfolio construction, and asset allocation, Paul explains how financial planning should be grounded in optimizing lifetime consumption rather than relying on disconnected rules of thumb.

We explore how life cycle finance integrates consumption, saving, investing, and retirement spending into a single framework, why risk tolerance and risk capacity are fundamentally different concepts, and how human capital should be treated as part of an investor’s balance sheet. Paul also walks through the life cycle model he and Tom Idzorek developed, explains why traditional retirement rules like the 4% rule lack theoretical foundations, and demonstrates an open-source spreadsheet that allows anyone to experiment with the model for themselves. This conversation brings together economics, portfolio theory, and financial planning into a practical framework for making better lifetime financial decisions.

Life Cycle Finance Spreadsheet https://rpc.cfainstitute.org/sites/default/files/docs/utility/ik-excel-lifecycle-model_v8_disclaimer-bundled.zip
Lifetime Financial Advice: A Personalized Optimal Multilevel Approach https://rpc.cfainstitute.org/sites/default/files/-/media/documents/article/rf-brief/lifetime-financial-advice.pdf
Disclosure: Links to third-party materials are provided for your convenience and do not constitute an endorsement or recommendation of the products or services offered therein.

Timestamps:

0:00:00 Intro
0:05:26 Defining lifecycle finance
0:06:15 Defining a lifecycle model
0:06:32 How Paul’s lifecycle model differs from others
0:10:38 The unique insights that come from Paul’s model setup
0:13:37 What is included in “holistic investor profiling” that most investors don’t account for
0:16:41 How Paul measures risk capacity
0:19:24 The problems with mixing risk tolerance and capacity assessments
0:22:16 How to apply utility theory and utility maximization to financial planning
0:23:18 How risk tolerance is related to utility maximization
0:24:25 The questions people can ask themselves to understand their preferences
0:26:52 What is being maximized in Paul’s lifecycle model
0:31:16 The output of the model
0:32:26 How life insurance and annuities fit into a lifecycle capital allocation
0:36:24 How uncertain future returns affect the outputs of a lifecycle model
0:37:17 Why the probability of survival at each age is a key factor in optimal lifetime financial planning
0:39:24 How to solve multiperiod ultility maximization problems that incorporate what has been discussed thus far
0:40:42 How spending rules, like the commonly used 4% rule, interact with lifecycle optimization
0:44:49 How the path of retirement spending interacts with the availability of annuities
0:46:09 Whether consumption should be an input or output for financial planning models
0:49:15 How important optimal asset location is
0:50:14 How optimal asset location deals with the uncertainty of future asset class returns
0:50:36 Why solving asset allocation and location is sequentially a mistake
0:52:09 Why it is important to have a target asset allocation before selecting funds
0:54:28 The tools investors can use to put everything talked about into practice
0:56:51 Paul’s spreadsheet walkthrough
1:10:38 The role Paul sees for financial advisors in lifecycle financial decision making
1:12:22 How Paul’s own research has influenced his own finances over time
1:17:47 Paul defines success in his life
1:19:42 Disclaimer

Links From Today’s Episode:

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/
Rational Reminder on YouTube — https://www.youtube.com/channel/
Benjamin Felix — https://pwlcapital.com/our-team/
Benjamin on X — https://x.com/benjaminwfelix
Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/
Dr. Paul Kaplan: https://www.paulkaplan.com/
Lifetime Financial Advice (CFA Institute Research Foundation): https://rpc.cfainstitute.org/research/foundation/2025/lifetime-financial-advice
Frontiers of Modern Asset Allocation (Wiley): https://www.wiley.com/en-us/Frontiers+of+Modern+Asset+Allocation-p-9781118029689
Popularity: A Bridge Between Classical and Behavioral Finance (CFA Institute Research Foundation): https://rpc.cfainstitute.org/research/foundation/2021/popularity-a-bridge-between-classical-and-behavioral-finance

Share on: