Assessing Both Longevity AND Mortality Risk For More Effective Retirement Plans

@boomdaddy3

Great article! A couple comments:

1) The idea of longevity-weighted dollars is a good one. The amazing site opensecurity.com does exactly that in assessing when users should take their social security: They figure out each partner's monthly payment in today's dollars based on the PIA, then they discount that figure for each year by the 20y TIPs rate (e.g. 2.3%). Then they multiply each of those discounted values for each year by the probability that each will be alive that year (so this year it's x1.0 but by 115 years is close to x0.), and add up each of those series of dollar values. It might be called Net Present Longevity-weighted Value.

2) See my recent post about the Society of American Actuaries site "Longevity Illustrator" to get odds for neither, each of you, or both of you being alive.

3) FWIW, Pralana could in theory implement this way of thinking fairly easily. For instance there could be a "longevity weighted values" tabular results page, showing some key yearly variables taken from the income and expenses sheets, and the grand totals.

I've done it in my own spreadsheets, and it's as simple as running some simple equations to calculate chances of neither, personA, personB, both people being alive, and then multiplying the values in the Pralana income and expenses tables by the relevant probability for each person, and summing up each columns at the end. One could even evaluate total lifetime spending on one of the spending methods or roth conversions using this method.

The issue is: Who would want that other than you and I? (Other than those who pay for IncomeLabs of course. :))

Here is the link: https://www.kitces.com/?s=Assessing+Both+Longevity+AND+Mortality+Risk+For+More+Effective+Retirement+Plan

I neglected to add to the original post. Also don't see how to edit an existing post or delete an extra post in this Forum.