Optimal Equity Allocation?

Since we are retired actuaries and not financial advisors, we don’t advocate any particular investment strategy in this blog.  For example, we don’t tell you how much of your assets should currently be invested in life annuities, bonds, cash equivalents, real estate or equities (particularly in these somewhat turbulent times for investing).  We do, however, provide several tabs in our Actuarial Budget Calculators (ABCs) that you (or your financial advisor) may find useful in developing your investment strategy.  This post will discuss these tabs and how they might be used. 

Budgeting for Real-World Situations

This post is a follow-up to our post of March 3, 2018 where we discussed the distinction between Systematic Withdrawal Plans (SWPs) and Sustainable Spending Plans (SSPs).  In that post, we discussed why we believe it is important for you (or your financial advisor) to develop a SSP (and not use a SWP), particularly if your situation differs from the frequently overly-simplified situations assumed by many SWP advocates, academics and other retirement experts.  This post will discuss how the Actuarial Budget Benchmark (ABB) can be used together with our recommended smoothing algorithm to help you develop a robust SSP to properly handle most real-world situations.  We will also present an example to demonstrate how this SSP can work over a ten-year projection period and will encourage you (or your financial advisor) to model what your future spending budgets might be under reasonable assumptions so that you can test your financial plan.