Self-Insuring Your Long-Term Care? What is the Present Value of Your Future Long-Term Care Expenses?

At How Much Can I Afford to Spend in Retirement? we encourage retired households to periodically compare the present value of their retirement assets with the present value of their spending liabilities to determine their Funded Status. Unlike other approaches that frequently ignore long-term care costs or assume that these costs will be met through insurance or from other assets, our approach encourages users to estimate the present value of these future uninsured expense liabilities just like any other retirement expense. 

No Reason to be so Conservative, Dr. Pfau

In his Rethinking 65 article, Slow and Steady Wins the Retirement Funding Race, Ed Prince outlines Dr. Wade Pfau’s “conservative formula for guiding clients to a secure retirement.” Dr. Pfau’s approach is essentially the same as the Actuarial Approach recommended in this website, with one fairly significant difference—it assumes all household investments earn the same conservative bond-like rate of return. And while you can change the default assumptions in the Actuarial Financial Planner to accomplish this same level of conservatism if you like, we believe higher assumed rates of return on risky investments/assets can be justified. 

Ditch Monte Carlo Modeling and Embrace the Actuarial Approach

Thanks to Kitces.com and Justin Fitzpatrick for once again informing financial advisors and retired DIYers that there are better metrics and processes for managing spending in retirement than the probability of success/failure metric typically used in Monte Carlo modeling. Mr. Fitzpatrick’s thoughts are summarized in the section of the August 23-24 Weekend Reading For Financial Advisors titled, Reframing “Risk In Retirement As ‘Over- And Under-Spending’ To Better Communicate Decisions To Clients, And Finding A "Best Guess" Spending Level.”

Measuring Retirement Risks

This post is a follow-up to our post of September 2, 2023, Manage Your Financial Risks in Retirement Like an Actuary, and is in response to the following recent quote from a well-known retirement researcher, “The No. 1 risk in retirement, hands down, is longevity risk.”

Passage of OBBBA Deepens Social Security’s Funding Hole

This post is a follow-up to our post of June 18, 2025 in which we addressed the magnitude of Social Security’s long-term funding hole based on results of the 2025 Trustees Report and their “intermediate assumptions.” Last week, Karen P. Glenn, the Chief Actuary of the Social Security Administration (SSA) updated the primary 2025 results in a letter to Senator Ron Wyden reflecting SSA’s understanding of the tax provisions in the One Big Beautiful Bill Act (OBBBA). 

Primary Reason Why Lifetime Income Products are Generally Better Investments for Retirees than Bonds

We advocate a Safety First (or Liability-Driven) Investment strategy for retired households which anticipates the use of relatively low-risk investments to fund future Essential Expenses (the Floor Portfolio) and higher-risk investments to fund future Discretionary Expenses (the Upside Portfolio). The non-risky assets/investments we advocate for the Floor Portfolio include:

• Social Security benefits
• Pension benefits
• Lifetime income annuities (SPIAs and DIAs)
• Tips ladders, and
• Non-lifetime fixed annuities

The first three items above (including deferring commencement of Social Security benefits) can be considered as lifetime income products for the purpose of this post. 

Should You Build a Social Security Bridge?

This month, the Bipartisan Policy Center released “Hedging the Risk of a Longer-than-Expected Life—The Value of a Social Security Bridge Strategy” authored by Emerson Sprick. Among the report’s key findings, Mr. Sprick says,

“A well-designed bridge strategy can significantly enhance retirement security and improve retirees’ financial well-being.”

This post will discuss the automatic Social Security bridge strategy built into the Actuarial Financial Planner (AFP) models to see how significantly this strategy may enhance one’s retirement security. See our post of April 15, 2020 for more discussion of delaying claiming of Social Security benefits. We hope that this post will help retirees make better financial decisions regarding the timing of their Social Security benefit commencement.

Use the Actuarial Financial Planner and Actuarial Process to Successfully Implement a Coast-Fire Strategy

 In his June 25, 2025 Kitces.com post, Adam Van Deusen encouraged financial advisors to help their clients understand when they may have enough retirement savings to “Coast-Fire” and keep working without necessarily saving more. The present value calculations required to implement this strategy are relatively straight-forward, but financial advisors (and DIYers) would be wise to use a tool like the Actuarial Financial Planner to perform the required calculations and an actuarial valuation process to manage assets, spending liabilities and risks for clients (or households) who actually choose to Coast-Fire. 

Valuing Your Hard-to-Value Retirement Assets

As indicated in many of our prior posts, the key metric for managing your spending, assets and risks in retirement is your Funded Status--the present value of your assets divided by the present value of your spending liabilities. The greater this measure, the healthier your financial status, all things being equal. As discussed in our post of June 3, 2025, you may wish to consider increasing your spending once your Funded Status exceeds 120% and you probably should be increasing your spending once your Funded Status reaches about 150% if you wish to avoid leaving an unintended legacy at death.

Eliminating the Cap on Social Security’s Taxable Wage Base

In 2025, the maximum taxable wage for determining payroll tax (FICA tax) contributions to Social Security (OASDI) is $176,100. This is also the maximum taxable wage for 2025 for determining an individual’s lifetime benefit (primary insurance amount) payable from the system. Under current law, the “cap” is adjusted annually based on the increase in the national average wage index.

Eliminating the cap is perhaps the most popular solution suggested these days for solving most of the system’s short and long-term funding problems. Since it only affects relatively wealthy working Americans, it is a solution that tends to have wide support among lower-paid workers and retirees, consistent with the famous Russell B. Long quote from 1973, “Don’t tax you, don’t tax me, tax the fellow behind the tree.” In this post, we will take a quick look at the pros and cons of eliminating the cap on Social Security’s taxable wage base.