Saturday, August 2, 2014

Are You "Most People"?

If you are visiting this site, you are presumably interested in developing a reasonable spending budget for retirement and how much of your accumulated savings you can afford to spend each year.  Thanks for visiting.  If you are looking for a super simple answer, I'm afraid you won't find it here (or anywhere).  The right answer for you depends on your personal situation and your objectives, and, yes, I'm afraid it involves a little number crunching. 

My friend, fellow actuary and former colleague, Steve Vernon, who is now a research scholar for the Stanford Center on Longevity, has told me that his research shows that most people aren't comfortable doing these types of calculations on their own, and they want someone else to do them for them.  If you are "most people" and are not comfortable with doing these calculations, you should probably consult a financial planner.  However, if you are not "most people", I suggest that you familiarize yourself with the Actuarial Approach set forth in this website.  We have put together a brief explanation of the process which includes an example and a screen shot of the Excel spreadsheet used for the calculations here.  Many of the entries in the spreadsheet have recommendations.  I assure you that it is not rocket science.  Our last few posts have illustrated that spending the little extra effort to do these calculations can pay large dividends.