In her recently released book The Forever Paycheck, Jean Chatzky—CEO and founder of HerMoney—encourages retirees to fund essential retirement spending with Social Security and non‑risky investments, and to fund discretionary spending with riskier assets. This aligns with what we have been recommending for many years. We refer to this investment philosophy as the Safety‑First approach.
Our Actuarial Financial Planners (AFPs) have incorporated the Safety‑First framework since 2021. They encourage retirees and financial advisors to explicitly distinguish between essential and discretionary spending, and they go further by allowing users to assign gradations (e.g., 50% essential / 50% discretionary) for expenses that do not fall neatly into one category. The same structure can be applied to categorize the assets used to fund those expenses.
Because neither expenses nor asset sources follow linear patterns over time, the Actuarial Approach, which relies on present values, is uniquely suited to handle spending and income streams that vary year‑by‑year. AFPs can easily model:
- Travel spending that ceases at age 80
- Taxes increasing at age 73 or 75 when RMDs begin
- Long‑term care expenses
- Deferred Social Security claiming
- Anticipated asset sales (e.g., home downsizing)
- Annuity income commencing at later ages
This flexibility is difficult to achieve in traditional withdrawal‑rate frameworks or Monte Carlo models, which typically assume uniform real spending and do not differentiate essential from discretionary needs.
We agree with Ms. Chatzky that the Safety‑First approach leads to more realistic and more reliable retirement guidance. If you are looking for a robust model that makes this approach easy to implement—for yourself or your clients—you should explore the Actuarial Financial Planner models available on this website.
