Sunday, March 5, 2017

Actuarial Approach with a Different Name

In their article, “Rethinking Retirement Liability,” authors Russ Hill and Sam Pittman introduce us to a financial planning technique that they call the “personal funded ratio.”  From what we can tell from the article, this technique is nearly identical to the Actuarial Approach we advocate in this website, where a retiree’s total assets are compared with her total liabilities (the authors prefer the terms “resources” and “claims”). 

It’s nice to read from these gentlemen what we have been saying in this website for a long time: 

“We believe the personal funded ratio [Actuarial Approach], a technique adapted from the world of defined benefit pension plans, can serve as a valuable addition to the financial advisor’s tool kit and provide a useful gauge for clients to understand how they can pursue their lifestyles both before and during retirement.”