Planning on Social Security

This post is a follow-up to our post of December 6, 2020 in which we suggested that, when developing your current year spending budget, “you consider the possibility that future Social Security reform may decrease the future benefits you receive from the system and/or increase your future taxes in some manner.” In response to that post, we received several comments questioning the premise that Congress would even consider the possibility of reducing Social Security benefits for beneficiaries in pay status. We fully understand that most people would prefer that someone else be required to pay the higher taxes and/ or have their benefits reduced in order to bring the system back into financial balance. In general, however, unless your means are very modest or you are very old, we believe it is more prudent for you to plan on some level of future benefit reduction or increase in taxes instead of simply assuming that the entire burden of achieving Social Security’s future financial balance will be borne by someone else.

Aligning Your Strategic Plan in Retirement with Your Spending Goals, Your Tolerance for Risk and Your Other Preferences Doesn’t Have to be That Complicated

Dr. Wade Pfau Response Subsequent to publishing this post, we received an email from Dr. Wade Pfau. Dr. Pfau indicated that he believed our post contained several misunderstandings about the Retirement Income Style Awareness (RISA), including: The core RISA is just twelve questions and not complicated. The RISA is used as a first step to get people started and is not used to develop a full financial plan, and It is simply about how to fund (what we call) the Floor Portfolio Dr. Pfau indicated that our readers who would like to know more about the RISA are invited to attend an upcoming Retirement Income Challenge that is not available to the public. This special invite can be reached by clicking this link.  We thank Dr. Pfau for his feedback and look forward to learning more about the RISA and its applications.

As retired actuaries, we understand that perhaps not everyone thinks the same way we do. No, don’t worry, we will not be talking in this post about politics, masks or vaccinations. We will, however, once again offer our thoughts on why we believe our Recommended Financial Planning Process is a relatively simple process that can be used to align your strategic retirement plan with your spending goals, your tolerance for risk, and your other preferences without requiring a lot of complex regression analyses or risk tolerance questionnaires.