Actuaries Promote Actuarial Methods/Tools for Retirement Planning

The actuarial profession has recently released two items that support the use of actuarial methods/tools for personal financial retirement planning.  The American Academy of Actuaries (AAA) released an Issue Brief titled, “Actuarial Observations on Retirement Income Approaches” and The Society of Actuaries (SOA), in conjunction with Stanford Center on Longevity, issued, “Viability of the Spend Safely in Retirement Strategy.”  While it should be noted that while neither of these two releases specifically endorses the Actuarial Approach advocated in this website, they do acknowledge that actuarial methods/tools can provide sound personal retirement planning analysis.  This post will briefly discuss these two releases and our response to them.

Do You Want to be More Aggressive with Your Upside Portfolio?

One of the advantages of the “Floor and Upside”, or “Safety-First”, retirement planning strategy is that once you have established a floor portfolio of low-risk investments intended to fund your future essential expenses, you can be more aggressive when investing and spending from the upside portfolio intended to fund your future discretionary expenses.  This is because, theoretically, it should not pose an undue hardship for you to reduce your future discretionary expenses if the need should arise.  It is important to note, however, that we are not pushing you to be more aggressive with investment or spending from your upside portfolio, but if being more aggressive with respect to spending from your upside portfolio is something that appeals to you, this post will show you how you can override the default assumptions applicable to discretionary spending to implement a more aggressive overall spending strategy.  We also include an example that utilizes results from our Actuarial Budget Calculator (ABC) workbooks.

Use the Actuarial Approach to Implement Your “Safety-First” Retirement Income Plan

Several of our readers have asked us to compare:

• the retirement planning strategy discussed in Dr. Wade Pfau’s recent Forbes article and his new book, “Safety-First Retirement Planning:  An Integrated Approach for a Worry-Free Retirement” with
• the seven-step planning process outlined in our post of August 25, 2019, which is designed to help users determine the amount of assets necessary to fund essential and discretionary expenses (floor and upside portfolios) in addition to determining recurring and non-recurring spending budget data points.