Saturday, December 10, 2016

We Have New and Improved Actuarial Budget Calculator (ABC) Workbooks

Just in time for your 2017 calendar year spending budget determinations, we have developed separate ABC Excel Workbooks for Retirees and Pre-Retirees.  These new workbooks (named Actuarial Budget Calculator for Retirees and Actuarial Budget Calculator for Pre-Retirees) are now available in our Articles and Spreadsheets section.  These two separate workbooks replace the Actuarial Budget Calculator V 1.2, which was primarily a workbook for retirees that included a separate tab for pre-retirees.  We have not changed the Present Value Calculator V 1.1 (PVC), which can still be used to calculate present values that may not be handled directly by the ABC’s.   Please try out these new workbooks and give us your feedback and suggestions for improvement.

ABC for Retirees—What’s New?

The new ABC for Retirees has much the same functionality of ABC V 1.2.  We have added the ability for users to input expected part-time employment income so that the present value (PV) of such income can be considered as another source of income, and therefore an asset to be used in the actuarial spending budget calculation.   This input item can also be used for sources of income that are immediately payable but are anticipated to be paid only for a limited period of years.   For example, if you don’t have part-time employment income, but you do expect to receive payment of a loan from a family member for the next 5 years, you could enter annual expected payments from the loan in this item.   If that doesn’t work, you can always use the PVC to calculate the present value of the loan repayments and enter this amount as the present value of other income.

We have also made other changes to the ABC for Retiree Workbook, including changing the name of the first tab to “Input and Results” and we have added a “Workbook Overview” tab that includes an explanation of the workbook and some of the general budget advice previously discussed in our blogposts.  As noted above, we have also deleted the Pre-Retiree tab. 

Finally, instead of inputting the PV of non-recurring expenses such as unexpected expenses and long-term care expenses in the Budget by Expense-type tab, we have provided inputs for these items in the Input and Results tab and the two runout tabs include separate runouts for accumulated savings and accumulated savings adjusted for the net present value of input PV items (items entered as present values rather than expected annual income and start dates of such income).   The difference between these two runout items is the accumulated value of the net input PV items which is assumed to be paid or received at some point prior to the end of the lifetime planning period.

ABC for Pre-Retirees—What’s New?

The tabs in this workbook are all new, with a focus on helping pre-retirees develop reasonable actuarial spending/savings budgets.   The tabs for this workbook are similar in operation to the tabs in the ABC for Retirees except there is no Budget by Expense-type tab at this time to help pre-retirees select a single assumption for increases in recurring expenses after retirement.

Instead of producing an immediate actuarial spending budget as developed by the ABC for Retirees, the ABC for Pre-Retirees produces an expected first year of retirement actuarial spending budget based on the data and assumptions (including rate of annual savings and desired years until retirement) entered into the Input and Results tab and compares the real dollar value of this projected spending budget with the real dollar value of the individual’s spending budget expected in the final year of employment to measure how the individual’s standard of living will be affected by retirement under the anticipated financial plan.

Assumptions and Encouragement

Both workbooks include our recommended assumptions (in the gray box in the Input and Results tab as well as in the Workbook Overview tab) for 2017 actuarial budget determinations.

There are 41 college football bowl games taking place in the next month.  Instead of watching each and every minute of all these games, we encourage you to take an hour (or maybe only as much as a half time) to sit down and plan your spending/savings budget for 2017 in the next month or so.  You’ll be glad you did. 

Happy Holidays from the team at How Much Can You Afford to Spend and Happy Budgeting!