Monday, November 7, 2016

Pension Actuaries Discuss Best Ways to Employ Assets to Mitigate Risks in Retirement

This post recommends two recent articles written by pension actuaries:  Mark Shemtob and Steve Vernon.

I volunteer with Mark Shemtob on the American Academy of Actuaries’ Lifetime Income Task Force.  The original mission of this task force was to “address the risks and related issues of inadequate guaranteed lifetime income among retirees.”  Mark is a consulting pension actuary like I was before I retired.  He is also a Certified Financial Planner and a Retirement Management Analyst.  His recent article, “The Retiree Nest Egg—Navigating the Risks” appears in the November/December 2016 issue of Contingencies Magazine, published by the American Academy of Actuaries.

Mark’s common sense advice to baby boomers regarding retirement planning can be summarized as follows:

  1. Continue to work (if you can) until you are satisfied you are financially ready to retire 
  2. Consider deferring commencement of your Social Security benefit until age 70 or purchasing a longevity annuity 
  3. If the sum of your Social Security and pension benefits doesn’t fully cover your fixed living expenses, consider purchasing a life annuity to cover the shortfall 
  4. Have a plan to cover future health-care costs, long-term care expenses and unexpected expenses 
  5. If your retirement spending strategy involves withdrawals from invested assets, make sure to monitor investment fee levels and selectively limit investment risk (perhaps by using a “bucketing” investment strategy that is coordinated with income to be received from other sources).
I worked with Steve Vernon for many years, and readers of this blog will recognize his name from the frequent references to his articles.  Steve was also a consulting pension actuary.  In his recent article, “6 retirement strategies from a local pro,” Steve discloses his own personal retirement strategy.  Not surprisingly, many of his 6 strategies are similar to those recommended by Mark.  Steve includes a couple of strategies that are not strictly financial.

I found the recommendations in Mark’s and Steve’s articles to be excellent and, for the most part, consistent with the opinions and recommendations we make in this website.   We may have small differences of opinion (like the best way to determine spending from investments, for example), but our thinking on retirement planning is not miles apart.   And maybe that is because we all think like pension actuaries.