A Planning Process That Works

You are responsible for your finances in retirement and need a plan that works. The Actuarial Approach, with its Funded-Status-focused process can help you:

• Grow your assets,
• Protect your assets,
• Spend your assets in a manner consistent with your goals, and
• Make better financial decisions.

To read more about the proven actuarial process we recommend, including a few hints for using the Actuarial Financial Planning models we provide, see our post of January 5, 2024. 

Check out our most recent Advisor Perspectives article if you are concerned about how future Social Security reforms may affect your plan.

Want a More Realistic Retirement Plan?

If you (or your financial advisor) aren’t planning for non-recurring expenses in retirement, you probably don’t have a realistic retirement plan. 

If you use a Strategic Withdrawal Approach (like the 4% Rule or its many variations) or your financial advisor uses a traditional Monte Carlo approach, your annual spending budget is usually expressed as a constant real dollar amount each year. Assuming constant real dollar spending for your entire period of retirement can either overstate or understate the assets you need to fund your retirement. This can occur because:

• Some non-recurring expenses (such as travel expenses, new cars, pre-Medicare healthcare premiums, home remodeling expenses) are primarily front-loaded during retirement, or
• Some non-recurring expenses (such as long-term care or bequest motives) are primarily back-loaded during retirement

If you want to develop a more realistic financial plan during retirement that reflects non-linear spending, we recommend you use a model like the Actuarial Financial Planner (AFP). The AFP distinguishes between future expected essential, discretionary, recurring and non-recurring expenses. See our post of April 16, 2022 for more discussion of this topic and our post of December 8, 2023 for discussion of steps you can take if there are an insufficient number of cells in the AFP to perform calculations of the present values of your non-recurring expenses (or other present values).

Time to Reduce Your Investment Risk?

With the S&P creeping up over 5,000, it may be time for retirees to look into decreasing their investments in risky assets, especially if their Floor Portfolio of non-risky assets/investments does not cover the present value of their expected future essential expenses. 

You can read more about what we consider to be the most important planning decision in retirement in our post of October 16, 2022.