Ken Steiner Interviewed on Money Mountaineering Podcast

Check out my interview with Pete Neuwirth on his 9th episode of Money Mountaineering.   You will quickly discover why I made my living as an actuary rather than as a tv personality. 

Unfortunately, Congress Did Not Adopt a Better Financing Approach for Social Security in 1983

In 1982, I wrote a paper for the Transactions of the Society of Actuaries entitled, “A Better Financing Approach for Social Security¹”. At the time, the National Commission on Social Security Reform was studying ways to solve the system’s impending short-term funding crisis and long-term funding imbalance, which eventually led to adoption of the 1983 Amendments to the system.

My proposed approach was relatively simple and anticipated:

• Making reasonable deterministic assumptions about the future
• Annual valuations to systematically compare the present values of system assets and liabilities
• A level tax rate if all assumptions about the future were realized (and no future changes in assumptions or benefits),
• Significant trust fund accumulation,
• Automatic adjustments of future tax rates to amortize:
  • Gains and losses from experience more or less favorable than assumed
  • Changes in actuarial assumptions
  • Changes in system benefits

I also discussed in the paper that if Congress did not want to implement the automatic tax rate changes (or didn’t like the expected trust fund accumulation), it could always decide to adjust benefits accordingly.

Don’t Forget Your Taxes

Taxes (federal, state, local, real-estate, Social Security, Medicare, etc.) are essential expenses that, unfortunately, must be planned for in retirement. As is the case with other expenses expected in retirement, we must make assumptions about how current tax expenses will change in the future to develop a reasonable estimate of the total present value of future household expenses (i.e., household spending liabilities), against which the total present value of household assets is compared. This post will address assumptions for projecting tax expenses using the Actuarial Financial Planner (AFP) and will include an example.

Would You Trade Your Pension for What is Behind Door #2?

Every so often we read something in the retirement-advice media with which we simply cannot agree. Recently, we ran across a video from Kiplinger entitled, “Why A Pension Lump Sum is Better than An Annuity Payment.” This video appears to be based on the May 5, 2022 article by Brian Skrobonja, CHFC, (updated on January 27, 2023) entitled, “Pension Lum Sum vs. Annuity Option, Which Is Better?” When the article was first released last year, we took issue with it and discussed its shortcomings in our post of May 5, 2022. If you are interested in this subject, we encourage you to re-read our post of May 5, 2022.