Are You Still Worried About Increasing Your Spending?

In our last post, we tried to encourage retirees afraid of (or behaviorally resistant to) spending their wealth to consider increasing their spending whenever their Funded Status exceeded a specific threshold percentage. In this post, we will take another shot at increasing your spending comfort level assuming safely increasing spending during retirement is consistent with your spending goals.

The “spend-less” Funding Status guardrail we recommend is 95%, and the “spend-more” guardrail we previously recommended in our post of January 7, 2023 for considering increased spending was 120%. The 150% (or 140%) Funded Status spend-more threshold used in the example in our previous post was considerably higher than our recommended 120% “spend-more” guardrail. We did this primarily to illustrate the process that could be used to transfer assets from one’s “upside portfolio” bucket to a “surplus bucket” whenever the Funded Status exceeded the specified threshold. We have absolutely no problem if you want to use a higher threshold than 120% as your spend-more guardrail, especially if you may be afraid of having to decrease your spending in the future. 

However, in this post, we are going to look at just how conservative the 120% Funded Status spend-more guardrail is by stress-testing it for a hypothetical couple. 

Use the Funded Status Metric and a “Surplus Bucket” to Increase Spending in Retirement

Most of us are relatively conservative when it comes to determining how much we can afford to spend in retirement. All things being equal, we would rather die with too much money than too little. Apparently, however, some researchers are worried that we may not be spending anywhere near enough and should buy life annuities to rectify that situation. In their recent article, researchers Drs. David Blanchett and Michael Finke reach several conclusions, including:

• “Individuals tend to view money held in savings accounts differently than wealth held in the form of income.”
• “Retirees spend a much higher percentage of their annuitized income and spend about half the amount that they could safely spend from non-annuitized wealth.”
• “Our results provide evidence that retirees bracket wealth held in investments differently than wealth held as income and consequently spend less than would be optimal in a life-cycle model.”
• “Retirees who are behaviorally resistant to spending down savings may better achieve their lifestyle goals by increasing the share of wealth allocated to annuitized income”, and
• “Less knowledgeable and risk-averse retirees may be particularly prone to underspending [since?] out of fear of depleting wealth.”

As a result of their research, they argue for implementation of policies that incentivize (or default to) the annuitization of retirement wealth.

Can I Afford to Buy that Dream Lake House (or Some Other Big-Ticket Item)?

In many of our prior posts, including our post of March 8, 2025, we have strongly encouraged readers to estimate the potential impact on their Funded Status before making a significant financial decision. In the March 8 post, we looked at how easy it was for a hypothetical couple to crunch the numbers on whether they could afford to go on a dream world cruise.

In this post, we will look at a slightly more complicated financial decision—Can I afford to buy something that involves not just an upfront cash outlay, but also involves ongoing annual costs and may also involve some future income during the period of ownership or when the item is eventually sold.

Thank You, Mr. President

As of the close of stock markets on April 8, 2025, the S&P 500 index was down about 15% from its close at the beginning of the year. It seems pretty clear that this decrease is primarily attributable to implementation of President Trump’s tariff policies. Whether the market’s decline will worsen or recover this year is uncertain. It is also uncertain what the impact of these policies will have on short-term or long-term inflation.

Generally, we encourage our readers to remeasure their Funded Status once a year at the beginning of the year. However, it may make sense to remeasure (or estimate) the household Funded Status during a year in which investment performance is significantly higher or lower than expected or in which a significant purchase or other financial decision is being considered by the household.

In this post, we will discuss how you can easily estimate the impact of the recent stock market decline on your beginning of year Funded Status and provide an example. Knowing the impact can possibly help you make better financial decisions during 2025. 

All About That Process

The future isn’t going to happen as you (or your financial advisor) assume, and your spending goals and actual spending are likely to change over time. Therefore, as previously discussed in our posts of April 16, 2023 and October 24, 2023, your retirement plan should include how you will determine when future adjustments to your plan may be necessary. We believe it is important for a good retirement plan to implement a robust process for making necessary future adjustments, and this process is likely to be even more important than the projection tool, or metric, used to measure the financial status of your plan.

Planning Tip--How Will My Funded Status Be Affected?

As discussed in previous posts, your Funded Status is an easily calculated, robust metric used to measure your financial health in retirement. Measuring and monitoring your Funded Status annually can help you make countless financial decisions. In this post, we encourage you to think about how your Funded Status will be affected before making a significant financial decision.

Retirement Researcher Discusses why He Prefers Funded Ratio to Monte Carlo Modeling

As discussed in our post of February 21, 2025, pre-eminent retirement researcher Dr. Wade Pfau has become an actuarial approach convert. You can hear Dr. Pfau and Alex Murguia discuss why they prefer using the Funded Ratio [Status] to Monte Carlo modeling for retirement planning in Episode 168 of their podcast series.

Better Financial Management in Retirement Through Better Metrics

In several of our recent posts, we have been touting the Actuarial Approach and its use of the Funded Status metric to measure household financial health. This is another one of those posts.

Support Grows for Using “Funded Status” Rather Than “Probability of Success” as the Key Metric for Measuring Financial Health in Retirement

This post is a follow-up to our post of February 13, 2025, How to Improve Decumulation Planning. Subsequent to that post, we received our copy of Retirement Planning Guidebook, by the preeminent retirement researcher, Dr. Wade Pfau.

Social Security Financing—When You’re in a Hole, Stop Digging Part 2

This is a follow-up to our post of October 14, 2024.  In this follow-up post, we will estimate Social Security’s January 1, 2025 Funded Status based on 2024 valuation results and once again point out that now is probably a good time for our congressional representatives to be looking at ways to increase system revenues and/or decrease system benefits to improve the system’s Funded Status rather than looking at ways to increase system benefits and/or decrease system revenues.