Looking to keep your spending on track and consistent with your spending goals in retirement? Forget the 4% Rule and complicated Monte Carlo simulations. Use the same basic approach/process that actuaries use for Social Security and pension plans.
The Actuarial Approach involves:
- Periodically (we recommend annually) comparing the present value of your assets with the present value of your spending liabilities to determine your Funded Status.
- Taking appropriate actions when your Funded Status falls outside reasonable guardrails.
That’s it! And you can use one of our free Actuarial Financial Planners to perform the present value calculations. As discussed in our previous post, this process does involve annually entering your granular spending budget items and your sources of income as well as expected future increase rates for these items. But, we believe the effort you put into this annual process will be worth it.
