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In her July 21 Think Advisor article, What’s Wrong With Advisors’ Retirement Planning Models, and How to Fix It, Bernice Napach highlighted some of the problems with planning models used by most financial advisors. Those problems were discussed by three distinguished financial planning experts in a panel discussion at the recent Engage 2020 virtual conference: Michael Kitces, David Blanchett and Michael Finke. And while Napach’s article detailed the problems raised by those gentlemen, it falls short at discussing the fixes.

This article discusses an obvious fix to those problems: Financial advisors should incorporate actuarial financial planning process (or components of it) into their planning toolkits.

Problems with current modeling tools and processes

Some of the problems noted by the panel experts included:


Current industry tools for retirement planning “are not very good.”


Tools don’t provide an adequate framework to adjust from two people in a couple to one (after first death within a couple).


Retirement plans need to quantify the value of non-financial assets. Advisors view assets as income but not income (like Social Security or pensions) as assets.


Plans should reflect flexibility to adjust spending.


Retirees also need to understand how much of their budget is fixed and how much is variable.