No Reason to be so Conservative, Dr. Pfau

In his Rethinking 65 article, Slow and Steady Wins the Retirement Funding Race, Ed Prince outlines Dr. Wade Pfau’s “conservative formula for guiding clients to a secure retirement.” Dr. Pfau’s approach is essentially the same as the Actuarial Approach recommended in this website, with one fairly significant difference—it assumes all household investments earn the same conservative bond-like rate of return. And while you can change the default assumptions in the Actuarial Financial Planner to accomplish this same level of conservatism if you like, we believe higher assumed rates of return on risky investments/assets can be justified. 

Ditch Monte Carlo Modeling and Embrace the Actuarial Approach

Thanks to Kitces.com and Justin Fitzpatrick for once again informing financial advisors and retired DIYers that there are better metrics and processes for managing spending in retirement than the probability of success/failure metric typically used in Monte Carlo modeling. Mr. Fitzpatrick’s thoughts are summarized in the section of the August 23-24 Weekend Reading For Financial Advisors titled, Reframing “Risk In Retirement As ‘Over- And Under-Spending’ To Better Communicate Decisions To Clients, And Finding A "Best Guess" Spending Level.”

Measuring Retirement Risks

This post is a follow-up to our post of September 2, 2023, Manage Your Financial Risks in Retirement Like an Actuary, and is in response to the following recent quote from a well-known retirement researcher, “The No. 1 risk in retirement, hands down, is longevity risk.”

Passage of OBBBA Deepens Social Security’s Funding Hole

This post is a follow-up to our post of June 18, 2025 in which we addressed the magnitude of Social Security’s long-term funding hole based on results of the 2025 Trustees Report and their “intermediate assumptions.” Last week, Karen P. Glenn, the Chief Actuary of the Social Security Administration (SSA) updated the primary 2025 results in a letter to Senator Ron Wyden reflecting SSA’s understanding of the tax provisions in the One Big Beautiful Bill Act (OBBBA). 

Primary Reason Why Lifetime Income Products are Generally Better Investments for Retirees than Bonds

We advocate a Safety First (or Liability-Driven) Investment strategy for retired households which anticipates the use of relatively low-risk investments to fund future Essential Expenses (the Floor Portfolio) and higher-risk investments to fund future Discretionary Expenses (the Upside Portfolio). The non-risky assets/investments we advocate for the Floor Portfolio include:

• Social Security benefits
• Pension benefits
• Lifetime income annuities (SPIAs and DIAs)
• Tips ladders, and
• Non-lifetime fixed annuities

The first three items above (including deferring commencement of Social Security benefits) can be considered as lifetime income products for the purpose of this post.