Saturday, May 12, 2018

We Continue to be Baffled by the Two Primary U.S. Actuarial Organizations

One of the nice things about having your own website is that you don’t have to rely on the kindness of strangers to communicate your ideas.  Our mission at How Much Can I Afford to Spend is a simple one:   advocating the use of basic actuarial and financial economics principles to try to help reasonably intelligent numbers people make better financial decisions.  And while we include advice and free workbooks in our website in an attempt to fulfill this mission, we occasionally submit articles to other media to try to reach a larger audience. 

Last year, we submitted (essentially the same article) entitled, “Think Like an Actuary to Help Achieve Your Personal Financial Goals” to the Society of Actuary’s magazine “The Actuary” and the American Academy of Actuaries’ magazine, “Contingencies.”  Click on the link to read it.  We felt that most of the readers of these publications just might qualify as “intelligent numbers people” who might be interested in their own personal financial planning.  Further, we assumed that the actuarial organizations sponsoring these publications would be supportive of what we are trying to do, as the problem of how much one can spend in retirement is essentially a world-wide problem that can benefit from an actuarial solution, and the vision and mission statements for these actuarial organizations include items such as:

  • The American Academy of Actuaries' mission is to serve the public and the United States actuarial profession. 
  • The Academy, through its public policy work, seeks to address pressing issues that require or would benefit by the sound application of actuarial principles. 
  • The Academy advances actuarial practice by informing and educating its members on public policy and professionalism issues and current and emerging practices. 
  • The Academy identifies and addresses issues on behalf of the public interest on matters in which actuarial science provides a unique understanding. 
  • The Academy increases the public's understanding and recognition of the value of the actuarial profession. 
  • Through education and research, the SOA advances actuaries as leaders in measuring and managing risk to improve financial outcomes for individuals, organizations, and the public.
Our assumption about receiving the support of the actuarial organizations was wrong.   Our article was rejected by both publications.
In the article, we thought that we were advocating:

  • How basic actuarial principles can serve the public and how actuaries can bring value to the table in the area of personal financial planning. 
  • How basic actuarial principles can address the “pressing issue” of how much one can afford to spend 
  • How to obtain and use our free Actuarial Budget Calculator (ABC) workbooks. 
  • How the Actuarial Approach and the Actuarial Budget Benchmark can work successfully with other approaches commonly used for financial planning. 
  • How “The Actuaries Longevity Illustrator” (developed jointly by the Academy and the Society of Actuaries) can be employed in personal financial planning.
And while representatives of the two publications felt that the Actuarial Approach and Actuarial Budget Benchmark concepts were perfectly valid, they felt that the article was too much “ad-speak.”  They concluded it was an advertisement, not for the items above, but rather for our website.   Since our website is where our free ABC workbooks reside, it is somewhat difficult for us not to encourage readers to visit the website in order to find them and to learn how to use them.

We are not complaining (well maybe a little bit).  We understand that not everyone thinks the same way we do, and magazine editors and their editorial boards can and do make judgements in selecting which articles to include and which to reject (and that is their prerogative).  We continue to be baffled, however, by the complete lack of support of The Actuarial Approach and the Actuarial Budget Benchmark (ABB) by the actuarial profession.  We believe that the ABB is a powerful spending algorithm that is much more robust than any strategic withdrawal plan (SWP) or spending algorithm built into typical Monte Carlo models, and the Actuarial Approach is a time-tested process to keep spending on track over time.  Despite these positive features, however, the actuarial profession appears to be reluctant to even discuss the Actuarial Approach, much less endorse it.

Are we overreacting and being too dramatic?  Perhaps.  We do understand that we are talking about spending budgets here and not a cure for cancer.  We also understand that many people neither need nor want to develop a spending budget.   On the other hand, helping intelligent numbers people who do want assistance with their spending is what this website is all about, and it is a mission that, rightly or wrongly, we are quite passionate about, and have been for years.

Are we disappointed?  Sure.  We generally find that individuals who spend the time to figure out our ABC workbooks feel that they are helpful.  Like the old Alka Selzer commercial, we say, “try it, you’ll like it.” Therefore, we would like to have more people try out the spreadsheets.   Unfortunately, instead of relying on the actuarial profession to shine a light on the Actuarial Approach and the Actuarial Budget Benchmark and expand the number of people who could potentially benefit from using basic actuarial principles to make better financial decisions, we are just going to have to depend on readers like you to spread the word.  Thanks in advance for your support and help in getting the word out.