A Simpler Alternative to Our Recommended Financial Planning Process?

In this post, we will compare our Recommended Financial Planning Process with a retirement income strategy recently suggested by Steve Vernon, a fellow Fellow of the Society of Actuaries, in his April 6 Forbes article, Retirees May Want to Revisit Their Savings Withdrawal Strategy.  Thanks goes to Ken’s buddy, Kyle Brown, pre-eminent ERISA attorney, for recently suggesting that comparing our strategy with Steve’s might make a good post.  As background, Kyle, Steve and Ken all worked together at The Wyatt Company (and its successor firms) as consulting pension actuaries (and primary legal resource) for many years when we were younger.

Yes, Retirees and Near Retirees Can, and Should, Plan for Stock Market Crashes

From time to time we come across an article in the personal retirement planning media that we have significant problems with.  Kristen McKenna’s April 16, 2020 Forbes article, Can You Plan For A Stock Market Crash? is the most recent to push our buttons.  Although she makes several good points, we have problems with Ms. McKenna’s article, such as:

Retirees -- Should You Defer Commencement of Your Social Security Benefits?

In our last post, we briefly mentioned that recent decreases in interest rates favored deferring commencement of U.S. Social Security benefits until age 70 versus starting them earlier.  The subject of when to commence Social Security benefits if you have retired has received attention in the media recently as a result of the Coronavirus pandemic and associated layoffs.  For example, in her April 11 Washington Post column, Michele Singletary asks the question, “Should you take Social Security early?” She indicates that at least for some, the Coronavirus has changed the math on waiting until age 70.

Discount Rate / Investment Return Assumption for Actuarial Budget Calculators

This post is a follow-up to our post of March 9, 2020, “What is the Cost of Lifetime Real Dollar Retirement Income?”  Since we released that post, assumed interest rates used by life insurance company actuaries to develop single premium fixed dollar life annuity quotes appear to have been reduced even further, and assumed short-term investment interest rates used in these quotes appear to have been reduced even more than long-term interest rates.  As a result, you may wish to consider using a lower Discount Rate/investment return assumption in your Actuarial Budget Calculator (ABC) planning calculations.

Social Security: Bad Luck for Those Born in 1960?

In addition to killing many people worldwide and causing significant disruption to many aspects of our lives, it looks like the Coronavirus Pandemic could also negatively affect projected Social Security benefits for millions of people born in 1960, unless some corrective action is taken by Congress.

Funding Essential Expenses in Retirement

This post is a follow-up to our posts of November 8, 2019, “Use the Actuarial Approach to Implement your ‘Safety-First’ Retirement Income Plan” and July 18, 2017, “McLean Asset Management Endorses Basic Actuarial Principles for Personal Financial Planning.”  Inspiration for this post is Dr. Wade Pfau’s April 3, 2020 Forbes article, “Is Buying an Annuity in a Bear Market a Good Idea?”

Is Your 94% Monte Carlo “Safe” Retirement Plan Still Safe?

Inspiration for this post comes from Michael Finke’s excellent Advisor Perspective article, “How Financial Plans Must Adapt to Market Crashes.”  In this article, Dr. Finke notes, “The Monte Carlo analysis only shows the probability of success at a single moment in time.”  Subsequent investment returns in excess of the average return assumptions baked into the Monte Carlo model will increase the probability of success, and returns below these assumptions will reduce the probability of success.  He points out that the market’s recent decline in response to the coronavirus pandemic may have had a significant negative effect on your previously calculated financial retirement plan probability of success.

Good Time to Up Your Financial Knowledge Game

It is possible that this Coronavirus pandemic will produce significant changes that will result in your government and your employer assuming much more responsibility for ensuring your financial and physical well-being.  Even though we are actuaries, we aren’t able to actually predict what will happen.  When planning your future, however, you can assume:

• that you will be taken care of by some third party or someone else,
• you will be largely responsible for taking care of yourself, or
• some combination of these two alternatives will emerge.

Ok Retirees, What is Your Plan Now that Stocks Have Entered a Bear Market?

Despite a 6% increase today (March 17), the S&P 500 index is down almost 22% for the year and almost 25% for the last month.  We are now officially in a Bear Market.   We have been reading lots of recommendations from retirement experts on what retirees should be doing in response.  Therefore, we thought we would add a few of our thoughts on the subject. 

Your Retirement Plan Should Incorporate Reasonable Goals, Assumptions and Processes

In his March 11, 2020 guest post in Michael Kitces Nerd’s Eye View, Charles Fox  “shares how a more robust analysis that accounts for real world outcomes and the potential for retirement delay (or retiring early) can be a powerful tool to really help clients plan for their goals.”  Like many financial advisors, Mr. Fox is a strong proponent of using Monte Carlo modeling as a better way to communicate risks and enable clients to make informed decisions (than under Mr. Fox’s straw-man deterministic model).  And while we have no problem with Monte Carlo modeling, per se, we believe (as discussed most recently in our post of October 8, 2019) that the purpose of the calculations and the assumptions and processes employed in the approach are much more important factors for developing a reasonable retirement plan than the type of the model utilized.  We encourage you to read the Kitces post and compare the analysis suggested by Mr. Fox for his hypothetical person, Wendy, with the analysis that Wendy could obtain by using our Actuarial Budget Calculator (ABC) for Single Pre-Retirees.