Establishing Dedicated Asset Reserves to Fund Different Types of Retirement Expenses

In his post of June 12, 2019 entitled “Segmenting Retirement Expenses Into Core Vs. Adaptive To Create Retirement Buckets”, Michael Kitces encourages his readers to consider separating expenses into “core” and “adaptive” expenses and creating separate “buckets” of assets dedicated to funding such types of expenses in the future.   We think this is excellent advice.  While we are not necessarily convinced that the terms “core” and “adaptive” suggested by Mr. Kitces are superior to “essential” and “non-essential” (or other similar terms commonly used), we are in complete agreement with the general reserving/bucket concept advocated in Mr. Kitces’ post, and, in fact, we have been advocating this concept for some time in our posts.  

Will Actuaries Miss the Boat Again on Social Security?

Every year, the Social Security trustees release a new report discussing the financial status of the Social Security system and every year, the American Academy of Actuaries (AAA) releases their “Actuarial Perspective” issue brief explaining the new report and the Academy’s recommendations for possible system changes.  In an effort to provide our U.S. readers a slightly different perspective on the system’s finances (so they can attempt to plan for future possible changes to the program), this post will discuss some of the issues with which we agree and disagree with the AAA issue brief.  This post updates our posts of June 27, 2018 and August 3, 2017 on this subject.  Clearly, the comments in our previous posts had very little effect on AAA thinking, as most of the language in their 2019 Actuarial Perspective remains unchanged from the language contained in their prior issue briefs.  For additional discussion of the various points discussed below, we encourage you to revisit our prior posts.