It’s Time, Once Again, to Measure Your Funded Status

Happy New Year! It’s the time of year that we ask you to perform your actuarial valuation to measure (or re-measure) your Funded Status. We encourage you to use the granular spending budget chart that we outlined in our post of December 25, 2024 to gather the estimated 2026 data to be inputted in this year’s Actuarial Financial Planner (AFP). 

Last year, Congress enacted new legislation affecting personal income taxes. You may wish to revisit your assumptions for 2026 and future years’ tax expenses. Remember that your taxes may increase in the future for various reasons, including application of RMDs and sales of appreciated assets. You should factor these expected increases in the present value of your expenses when determining your Funded Status.

Default Assumptions for 2026 Actuarial Financial Planner

We’ve increased the default investment return/discount rate for risky investments/discretionary spending from 8% to 10%. All other assumptions are unchanged from those used last year. As with all the default assumptions in the spreadsheet, you can change them if you want by following the assumption change override process. You can also change them to stress test your plan.

How Long Do You and Your Spouse Plan to Live, Part 2

This post is follow-up to our post of December 22, 2024 and will again highlight the benefits of using the Actuaries Longevity Illustrator (ALI) to help you develop reasonable lifetime planning period (LPP) assumptions for your household. As we did in Part 1, we will also discuss the financial implications of planning for longer-than-life expectancy LPPs.

U.S. Actuarial Profession Develops a New Story Explaining Social Security’s Financial Decline Since 1983

After enactment of the Social Security Reform Act of 1983, Social Security actuaries determined OASDI’s (Social Security’s or the system’s) long-range actuarial balance (LRAB) to be .02%, meaning that the system was considered to be in actuarial balance for the “long-range,” which the actuaries defined as the next 75 years. Being in long-range actuarial balance in 1983 was an important consideration for congress in crafting the provisions of the new law, and some members of congress were not terribly happy with the actuaries back then when, just before passage of the new law, they increased the LRAB from -1.82% in 1982 to -2.09% to reflect passage of the Tax Reform Act of 1982.