Since 2010, I have argued on this website that the principles and processes actuaries use to assess the financial condition of institutions can also help retired and near-retired households make better planning decisions. However, as discussed in our post of March 5, 2023, the actuarial profession has been reluctant to advance actuarial solutions to the decumulation problem.
I was therefore pleased to read Mark Shemtob's article, "The Roth Question," in the September/October 2026 issue of Contingencies Magazine. Shemtob's emphasis on building models that incorporate relevant assumptions illustrates the kind of disciplined framework that can improve household financial decisions. As he notes, "this work is clearly in the 'wheelhouse' of actuaries” and reflects the valuable “experience actuaries can bring to individual retirement planning."
The actuarial approach advocated on our website adapts fundamental actuarial concepts and practices for use by retired and near-retired individuals and families. These include:
- making explicit assumptions about the future;
- recognizing the time value of money;
- incorporating probability and mortality;
- calculating actuarial present values;
- using an individual financial model that compares assets with liabilities;
- conducting periodic valuations and making gain-or-loss adjustments when experience differs from assumptions; and
- applying an appropriate degree of conservatism.
These concepts are summarized in Charles Trowbridge's 1989 monograph, Fundamental Concepts of Actuarial Science (which is available in the “other calculators and tools” section of our website).
Their value is practical rather than merely theoretical. They can help households evaluate spending, investment risk, Roth conversions, longevity risk, and legacy objectives within a single financial “funded status” framework.
As discussed in our January 13, 2026 post, Retirement Researcher Wade Pfau and Alex Murguia also emphasized the importance of present values in retirement planning, noting in their podcast that "present values are the heart and soul of retirement financial planning calculations."
We believe the actuarial approach, and its annual funded status calculation, offers a more complete framework than relying primarily on fixed withdrawal strategies or standalone Monte Carlo results. By explicitly valuing both assets and future obligations, testing assumptions, and regularly reconciling actual experience with expectations, it gives households a disciplined way to revise their plans as circumstances change.
