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21 Jun. 2017 | Comments (0)

This blog serves as a follow-up on my recent post: Financial Wellness Part 1: Employer Program Considerations

As mentioned in my previous blog, the Society of Actuaries recently published a collection of essays on financial wellness. Overall, the essays focus on ideas and suggestions to improve financial wellness through better planning and personal financial management. These ideas are important to employers who may decide to offer employees planning support through software and/or individual advisers. This blog post shares ideas from the essays discussing personal planning considerations and provides my perspective on these issues.

Essays focused on financial wellness and individual responsibility

Among the wide variety of topics that essays in the collection cover, a number of them offer ideas for personal action and planning. It is critical to remember that individuals themselves are ultimately responsible for their retirement security. Personal planning and decision-making involves trade-offs, discipline, complex choices, and periodic adjustments. Plan sponsors cannot eliminate the challenges this responsibility brings, but they can offer tools, education and a roadmap that can help lead to a secure retirement destination.  In covering a range of aspects of the planning process, the essays are well-balanced and complement each other very well.

A framework for thinking about the post-retirement period: One of the essays, "A Framework for Multilayered Post-Retirement Financial Planning Strategy: Critical Assessments of Individual Needs and Available Resources," by Joonghee Huh, defines a framework for designing layers to address post-retirement man at a computer planning his future, holding a childneeds and provide elements of support. The essay further defines a paradigm of planning adjusted for different levels of certainty for each layer. The three planning layers are  basic living costs,  costs to provide comfortable living, and desired intergenerational transfers.  The author suggests that basic living costs should be covered with certainty, comfortable living costs with x percent probability of covering them and the desire for intergenerational transfer with a probability of y percent. Each layer would then have a different type of funding strategy. For example, basic living costs would be funded by Social Security, defined benefit pensions and annuity income. The choice of x% and y% probabilities would influence funding strategies for these layers. To cover these layers, the author describes the elements of support: government safety net, social safety net, e.g. family support, retirement plan accounts (both employer-sponsored and individual), and additional personal savings. 

An alternative framework for the post-retirement period: "Time to Ditch the Three-Legged Stool Analogy for Retirement and Replace with a Two-Picture Analogy: A Mailbox and a Piggy Bank," by Barry Kozak, looks at a simplified way to think about the post-retirement period. The essay focuses on using a stream of fixed income to pay living expenses, and a nest egg to pay other expenses. Regular living expenses include home-related expenses, taxes and fees, repayment of debt, automobile expenses, insurance premiums, personal expenses including food and clothing, and budgetable discretionary expenses. Unlike the previous essay above, there is no separation of expenses into basic living costs vs. those that raise the standard of living.

Applying actuarial principles to personal financial well-being: The essay titled "Using Sound Actuarial Principles to Enhance Financial Well-Being" and written by Ken Steiner, focuses on balancing asset accumulation and consumption and keeping the balance intact throughout working and retirement years.  Key principles are matching assets with liabilities, keeping track each year, monitoring results and making appropriate adjustments. Keeping track, monitoring and adjusting the plan should be part of any longer term planning process. This essay also encourages readers not to forget medical expenses, other unexpected expenses and the role of home equity. The two essays discussed above focus more on identification of the assets and consumption, whereas this essay is concerned with following a process that works well over time.

Thinking about a personal risk manager: "Personal Risk Manager: Driver of Resilience" suggests the use of a personal risk manager. The author, Max J. Rudolph, suggests that a personal risk manager can help with maintaining a margin of safety, using scenarios to test potential outcomes, using cost-benefit analysis to support decisions, and making conscious choices rather than accepting defaults. Individuals can serve as their own personal risk manager or engage someone else.

Other Essays

The collection also includes essays that focus on choosing assumptions for planning calculations; special issues for families providing support to family members and others in need of assistance; and lessons learned by authors from their own personal experiences. 

For the plan sponsor, the essays that focus on personal planning provide insightful ideas that can be integrated into their programs and objectives in several ways:

  • They can help sponsors decide what types of issues to cover in wellness programs.
  • They can provide background for evaluation of educational and planning tools for employees.
  • They can be offered as resources to employees who want to think about their own planning.

My perspective

The essays are largely about financial considerations and it is true that discussing money is critical to planning for retirement. But it is not the whole story. I recently wrote my own definition of retirement wellness, in an article for Benefits Quarterly.:

“To me, retirement wellness means:

  • Having a framework – financial, social and purposeful activity, and health related – for managing one’s life in retirement.
  • Having sufficient financial resources and a system to manage them to make the framework a reality.
  • Having knowledge and perceptions that are compatible with the framework and resources.
  • Having passions and activities that bring meaning to one’s life.
  • Working to maintain reasonable health or to manage one’s life satisfactorily within the constraints that are present.
  • Having housing that supports life activities and personal needs, and that is compatible with financial resources
  • Having a basic financial structure to build on.
  • Having a reasonable network of personal contacts.”

These essays help convey that there are a number of dimensions to think about in planning and practices to consider. Even more importantly, they drive home the message that there are no easy, simple answers. Thank you to the Society of Actuaries for sponsoring these essays.

Accessing the Essays: the essays are found in the Financial Wellness Essay Collection on the Society of Actuaries website.  They are part of the research page on Aging and Post-Retirement where many additional reports on retirement topics can be found.


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  • About the Author: Anna M. Rappaport

    Anna M. Rappaport

    Anna Rappaport is an internationally recognized expert on the impact of change on retirement systems and workforce issues. Following a 28-year career with Mercer Human Resource Consulting, Rappaport h…

    Full Bio | More from Anna M. Rappaport


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