Using the Actuarial Approach to Avoid Financial Traps in Retirement

Like you, we read many articles on the Internet that dispense financial advice to retirees. This one entitled, “11 Financial Traps Retirees Don’t See Coming” recently caught our attention. While we hope that most of our readers are aware of these financial traps and are planning for them, it doesn’t hurt to revisit them from time to time.

In this post, we will summarize and briefly discuss the eleven financial traps (or risks) set forth in the article and how almost all these risks are relatively easily addressed by applying the Actuarial Approach. We will also add a few to the author’s list.

Self-Insuring Your Long-Term Care? What is the Present Value of Your Future Long-Term Care Expenses?

At How Much Can I Afford to Spend in Retirement? we encourage retired households to periodically compare the present value of their retirement assets with the present value of their spending liabilities to determine their Funded Status. Unlike other approaches that frequently ignore long-term care costs or assume that these costs will be met through insurance or from other assets, our approach encourages users to estimate the present value of these future uninsured expense liabilities just like any other retirement expense.