Monday, October 31, 2016

Is it Time for a 2016 Spending Check?

The last thing I want to do with this post is put a damper on your holiday season, but we only have two months left in the calendar year, and for many retirees, the holiday season can involve increased expenses.  Before you generously shower gifts on your family and friends this year, you might want to check to see how you are doing so far with your 2016 spending and investments. 

As discussed in our post of September 4 of last year, if you are using the Actuarial Approach to determine your spending budget, there is a relatively easy process you can use to check to see how you are doing in terms of meeting your spending and investment targets for the year.   The Runout Tab of the Actuarial Budget Calculator you used to determine your 2016 spending budget showed your expected accumulated savings at the beginning of year 1 (2017) if all assumptions were realized and you spent exactly your 2016 spending budget.  

To see how well you have done so far for 2016, you will need to

  • estimate your spending and income for the final two months of 2016 and 
  • compare your estimated end-of-year accumulated savings with the beginning of year 1 (2017) amount shown in the Runout tab of the 2016-year calculation.
If your estimate of year-end accumulated savings is significantly lower than the expected value (either because of over-spending or lackluster investment returns (or a combination of the two), you might want to consider reducing some of your expenses for the remainder of the year if you can.  To see the impact of over-spending or under-earning on your 2017 actuarially determined spending budget (before any smoothing you might choose to use), just enter your end-of-year accumulated savings estimate in the spreadsheet and pretend you are doing the calculation at the beginning of 2017.