We are happy to add two more Excel Spreadsheets to our toolbox of MS Excel actuarial spreadsheet tools—The Actuarial Financial Planner (AFP) for Single Retirees and the Actuarial Financial Planner for Retired Couples. These spreadsheets are very similar to our Actuarial Budget Calculators (ABCs), but differ in the following ways:
- The AFP utilizes one “all-in-one” interactive tab rather than spreading the calculations over three different tabs, as the ABC does. That is, the AFP combines information from the ABC Input & Results tab, the Asset Reserves by Expense Type tab, and the Actuarial Balance tab.
- The AFP permits the use of a different investment return assumption for Upside Portfolio assets (as opposed to the investment return assumed for Floor Portfolio assets), rather than simply noting that you can be more aggressive with respect to spending of Upside Portfolio assets.
The purpose of the AFP is to help you more easily implement the 7-step Recommended Financial Planning Process advocated in our website. This process may be used to:
- Test the financial viability of your retirement plan
- Provide data points for determining your current year spending budget (i.e., How Much You Can Afford to Spend in Retirement)
- Provide data points for developing a Liability-Driven Investment (LDI) strategy in retirement, and
- Provide information to help you better assess and manage your risks in retirement and make better financial decisions.
While it does not optimize Roth conversions, optimize your taxes, help you select the best Medicare supplement plan or use historical investment returns to produce simulations and probabilities of not running out of money in retirement, it is a robust planning tool that possesses functionalities frequently not seen in other retirement calculators or Monte Carlo models, including:
- Reflection of all assets and spending liabilities in the model
- Opportunity to input different rates of future expected increases for different types of expenses
- Opportunity to consider which expenses are essential and which are discretionary (and may be reduced in the future, if necessary)
- Opportunity to input a desired reduction in recurring expenses upon the first death within a couple
- Opportunity to Input different lifetime planning periods for different members of a household
- Default Lifetime planning periods (which may be changed if desired) that reflect probabilities of survival from the Actuaries Longevity Illustrator based on age and gender.
- Opportunity to input non-recurring as well as recurring expenses
- Quantification of the values of non-financial assets
- Quantification of the size of a Floor Portfolio of non-risky assets estimated to be necessary to fund future essential expenses.
In summary, the AFP is our one-tab actuarial financial planning choice to help us sleep better at night by better aligning our strategic plan in retirement with our spending goals, our tolerance for risk and our other preferences.
