Does Your Planning Model Distinguish Between Essential and Discretionary Spending in Retirement?

In her recently released book The Forever Paycheck, Jean Chatzky—CEO and founder of HerMoney—encourages retirees to fund essential retirement spending with Social Security and non‑risky investments, and to fund discretionary spending with riskier assets. This aligns with what we have been recommending for many years. We refer to this investment philosophy as the Safety‑First approach.

How Much Can 70-Year-Olds Afford to Spend from Accumulated Savings of $4 Million?

It is always interesting to review spending levels recommended by advisors and financial commentators for hypothetical retired households and compare them with amounts generated using the Actuarial Financial Planner (AFP) workbooks.

New Spreadsheet: RMD Tax Present Value Estimator

We are pleased to announce the availability of our new RMD Tax Present Value Estimator workbook.

To determine the present value of future household spending liabilities, the Actuarial Financial Planner (AFP) workbooks require users to estimate annual recurring essential expenses and the expected rates at which those expenses will increase. These expenses include recurring federal and state income taxes. In our post of August 23, 2026, we discussed estimating the present value of future taxes by separately considering recurring annual taxes and non-recurring taxes, such as those associated with future Required Minimum Distributions (RMDs).

How Frequently Should You Change Your Lifetime Planning Period Assumptions?

Assumptions regarding how long you and your spouse, if you have one, plan to survive in retirement are central to determining your funded status. These assumptions — your lifetime planning period assumptions (LPPs) — define the horizon over which assets must support spending. The Actuarial Financial Planner (AFP) model on our website includes default LPPs based on the ages entered and planning horizons from the 2022 Actuaries Longevity Illustrator, using the 25% chance‑of‑survival metric for non‑smokers in excellent health.

It’s All About the Present Values, Part III

Present value is the organizing principle of the Actuarial Approach recommended on this website. Retirement sustainability ultimately depends on a single question: Can the present value of your assets support the present value of your planned lifetime spending? The ratio of these two quantities — your funded status — provides an actuarially coherent measure of retirement readiness and a disciplined way to monitor financial solvency over time.

Many readers find present value calculations challenging, particularly when applied to long‑range spending plans. The Actuarial Financial Planner (AFP) workbook is designed to handle this complexity for you. All inputs are entered in the Input & Results tab, and the AFP automatically performs the present value calculations in the PVCalcs tab using risk‑adjusted discount rates. These discount rates allow you to compare the present value of non‑risky assets with the present value of essential spending on a consistent basis.

It’s All About the Present Values, Part II

In our January 13, 2026 post, we thanked Dr. Wade Pfau for highlighting that present value calculations are the “heart and soul of retirement financial planning.” Present value is the foundation of the Funded Status framework: when you divide the present value of your household’s assets by the present value of your planned spending (your spending liabilities), you obtain a powerful metric that helps answer the central retirement question — How much can I afford to spend?

A Progressive COLA‑Cap Approach for Strengthening Social Security’s Finances

This week, Advisor Perspectives published my article entitled, “Social Security’s Short‑Term Crisis: What Advisor’s Must Prepare For.” The primary purpose of this article was to focus on possible solutions to the system’s short-term financing problems, not its long-term financial problems. One of the alternative solutions discussed in the article involved freezing cost‑of‑living increases (COLAs) for several years. While a temporary freeze is an efficient short‑term lever, it is also regressive and politically difficult. An alternative approach is to modify the COLA formula itself in a way that protects lower‑benefit retirees while moderating both short-term and potential long-term cost growth.

This post outlines a progressive COLA‑cap mechanism that accomplishes those goals.

Planning Your Discretionary Spending in Retirement — Like Ordering Off a Menu

Sustainable retirement spending begins with quantifying the present value of your essential expenses and then allocating the remaining funded status toward discretionary “menu items” such as travel, hobbies, or gifts. Most retirees struggle not because they overspend, but because they lack a framework for understanding how long their discretionary choices remain sustainable. The Actuarial Financial Planner (AFP) provides that structure.

Funded Status: The Better Measure for Managing Retirement Spending (Including Big Purchases)

Retirement planning is often dominated by withdrawal rules, Monte Carlo probabilities, and portfolio‑centric heuristics. But none of these tools directly measure the core financial question every retired household faces: Can my assets support the lifetime spending I want—including the occasional big purchase—without jeopardizing long‑term solvency?

The actuarial answer is funded status.

New: Copilot Will Review Your Completed Actuarial Financial Planner Workbook

Many users have told me they aren’t always sure how to enter their assets and spending liabilities into the Actuarial Financial Planner (AFP) Excel workbooks. That’s completely understandable — the actuarial approach is powerful, but it’s also more detailed than traditional “safe withdrawal rate” tools.

To make things easier, Microsoft Copilot can now review your completed AFP workbook and provide a clear, structured summary of what you entered — along with comments on your actuarial funded status.

Increase Your Discretionary Retirement Spending While You Are Healthy and Active—Part 2

Retirement researchers increasingly recognize that real spending does not remain flat throughout retirement. As Dr. David Blanchett emphasized in his recent Think Advisor article:

 “Integrating reduced real spending into retirement income models not only improves the outcome of decisions around appropriate portfolio withdrawal rates, but also optimal portfolios, allocations to lifetime income, and so forth. Therefore, the more widely reduced real spending is leveraged in retirement research and financial planning tools, the more realistic the guidance is going to be.”

FAQ: How to Input Data for Deferred Assets and Expected Non‑Recurring Expenses in the Actuarial Financial Planner

Households often have assets they expect to use during retirement that are not level streams of income, as well as expenses that are not expected to recur every year. These items need special handling in the Actuarial Financial Planner (AFP) because they occur at specific future dates and often carry different risk characteristics than ongoing retirement spending.

How to Use Copilot to Implement the Actuarial Approach

We have recently received inquiries as to how to use Copilot to implement the Actuarial Approach. Copilot can use different data sources to provide reasonable results, but we recommend that you provide Copilot with the specific data required by the Actuarial Financial Planner. This post explains the best way to use Copilot — whether you are an advisor working with clients or a retiree managing your own plan.

Planning Key: Plan to Live Longer Than You Expect to Live

Prudent retirement planning requires using a planning horizon longer than your life expectancy. In prior posts we have recommend using the Actuarial Longevity Illustrator and the three-step process outlined in our Advisor Perspectives article to select your household lifetime planning period(s). In this post, we will once again discuss the importance, in planning and retirement decision-making, of focusing on how long you plan to live, not on how long you expect to live. 

2026 Trustees Report Issued — Once Again, Results Are Worse Than We Predicted

The 2026 OASDI Trustees Report was released today. Last month, we estimated that Social Security’s long‑range actuarial balance as of January 1, 2026 would be –4.14% of the present value of taxable payroll over the next 75 years (down from –3.82% in 2025), corresponding to a funded status of roughly 76%. Our estimate turned out to be optimistic.

Understanding the Retirement Probability Simulator (RPS): A Complement to the Actuarial Financial Planner

We recently came across a Monte Carlo modelling tool called the Retirement Probability Simulator (RPS). It is a free tool available at DIYretiree.com that our readers may find useful in their financial planning.

In this post, we will discuss the similarities and differences between our Actuarial Financial Planner (AFP) model for retirees and near retirees and the RPS (for retirees and pre-retirees) and how they can work together.

Announcement: Microsoft Copilot Joins Our Retirement Planning Team

We are pleased to announce that Microsoft Copilot is now an integrated part of our “How Much Can I Afford to Spend in Retirement?” team. Copilot enhances our actuarial approach by providing structured reasoning, rapid scenario analysis, and clear explanations of complex financial tradeoffs.

ChatGPT says the Actuarial Approach and its Funded Status Metric “Stands Above the Alternatives”

We recently asked ChatGPT two questions about using the Actuarial Approach and its Funded Status metric to evaluate a household’s retirement sustainability. ChatGPT had high praise for the Actuarial Approach. 

How Bad Will the News Be in the 2026 Social Security Trustees Report?

The 2026 OASDI Trustees Report is expected to be issued in the near future.  Last year, the 2025 report was released in June.   Like we did last year, we will take a shot at predicting this year’s 75-year actuarial balance (deficit) before the report is issued.

What is Your “Sleep Well at Night” Funded Status?

In this post, we discuss how you can use the Actuarial Approach and its funded status metric to help you feel more confident about your spending plan in retirement. It is a follow-up to our post of January 11, 2026.

Bottom line: Having a sufficiently high funded status can help you sleep better at night. The question we address in this post is just how high does this target funded status need to be for you—120%, 140% or higher?