Updated Glossary

As you may know from our biographies, we are two retired Fellows (of the Society of Actuaries) here at How Much Can I Afford to Spend in Retirement.   I (Ken) do most of the initial post drafting and Bobbie does most of the post review and correction.  In her review capacity, Bobbie does her level best to replace technical actuarial jargon, and other technical jargon, with English.  She takes her job of making the posts more understandable for a wider audience very seriously.  She will frequently ask me, “if I don’t understand what you are talking about, how do you expect your non-actuarial audience to understand?”

In pursuit of enhancing understanding of our posts, Bobbie has recently updated the glossary of terms that we frequently use.  You will find it in the “Glossary” section.  Feel free to suggest additional terms or changes you would like to see in this section, or elsewhere in our website, to make this site more useful to you.

Recommended Financial Planning Process for Retirees and Near-Term Retirees Example #2--Pensions are Nice

Every once in a while, we get an inquiry from a new reader asking us to briefly summarize the process we recommend for determining the financial feasibility of retirement for retiree wannabes or for determining spending budgets and possible investment strategies for actual retirees.  Recently, we have been pointing such readers to our posts of August 25, 2019 (Link 1)(Link 2) for a description of our recommended seven-step process and a numerical example.   However, we realize that as time passes, not all of our readers may be familiar with posts that are six months or more old.  Therefore, this post (and we intend periodic future posts) will revisit our recommended process and walk you through a different example each time.

How Much Can I Afford to Spend in Retirement Turns Ten

In March, 2010, our website started with publication of “Self-Insuring Your Retirement?  Manage the Risks Involved Like an Actuary.”  Since around 2005, I had been trying to find a home for this article (or articles similar in concept that advocated the same basic actuarial principles I had used as a pension actuary), but AARP, EBRI and the various US actuarial organizations were just not interested.  As I was about to retire in 2010, one of my younger work associates, Kin Chan, mentioned to me that websites were the new way to self-publish, and maybe I should explore that option.  Thanks to Kin’s suggestion and his help setting up our website, How Much Can I Afford to Spend in Retirement was launched.

The SECURE Act – So, What is a “Lifetime Income Stream Equivalent” of Your 401(k) Account Balance? How Will It be Calculated? And Why Should You Care?

In accordance with Section 105(a)(2) of the Employee Retirement Income Security Act (ERISA), as amended by the SECURE Act of 2019, defined contribution plan sponsors will soon be required to disclose two lifetime income stream equivalents (LISEs) of a participant’s current account balance under the plan at least once during each twelve-month period in participant benefit statements.  The two required LISEs are:

How to Develop and Implement a Strategic Plan for Your Retirement

In our post of September 25, 2019, we encouraged you to take responsibility for your own retirement.  In this post, we will build on our previous post by encouraging you to adopt and implement a strategic plan for your retirement.

How Do Expected End-of-Life Expenses Affect Your Current Recurring Expense Spending Budget?

One of our readers recently indicated that he was planning on using the proceeds from the sale of his home to fund several years of assisted living for spouse and himself when and if the need for such long-term care arose.  The reader wanted to know how to use our Actuarial Budget Calculator (ABC) to explore doing this, and how such a plan would affect their current recurring spending budget.  This post is a follow-up to our post of January 12, 2016 and addresses how you can use our ABCs to determine how your anticipated long-term care and bequest expenses will affect your current recurring expense spending budget.

“Big ERN” Discovers the Basic Actuarial Balance Equation

Thanks to one of our readers, Ian Holliday of the U.K., for letting us know that Karsten, a blogger at Early Retirement Now (with the nickname “Big ERN”) has made available a Google spreadsheet entitled EarlyRetirementNow Actuarial SWR Toolbox.    His new actuarial spreadsheet is very similar conceptually to the Actuarial Budget Calculators for single retirees and retired couples that we make available in this website.  He utilizes the Basic Actuarial Balance Equation and calculates the present values of assets and spending liabilities (using deterministic assumptions—no simulations) to develop a recurring expense spending budget “data point.” 

Time to Perform Your January 1, 2020 Actuarial Valuation

As part of our ongoing effort to encourage you to think more like an actuary when it comes to your personal finances, this post will recommend that you to perform an actuarial valuation based on your personal data as of January 1, 2020. We also encourage you to prepare an “Actuarial Report” to document your thought process and your planning decisions.  The purposes of this year-end planning exercise are to:

Looking to Calm Those Retirement Spending Fears?

Are you losing sleep because you think you’re spending too much in retirement?  Or maybe you’re spending too little now because you are worried about possible future expenses?  A recent article by Christopher Carosa, entitled, “Why Are We Seeing More Cases of ‘Fear of Spending’ Among Retirees?” discusses this latter fear.  Mr. Carosa notes, “After a career focused on saving, when it comes time to retire, the saving tap is turned off and the spending tap is (supposed to be) turned on.  For many retirees, that’s when the sudden fear of spending kicks in.  And there may be indications this phobia is reaching pandemic levels.”

Actuarial Budget Calculator (ABC) Tips

One of the basic building blocks for the actuarial approach that we advocate for developing a spending budget and for basic personal financial retirement planning is the Basic Actuarial Balance Equation for personal finance.  We provide several Excel workbooks in the “Spreadsheets” section of our website to help individuals and couples perform the present value calculations required to solve this equation, based on their data: