Retire On Your Terms

Budgeting Basics

If you're like most Americans, you don't like the word "budget," as it conjures up feelings of deprivation. Much like "healthy eating" sounds better than "diet," look at budgeting as more than just restricting your spending, but rather as a pro-active approach to enjoying a life you love, today and in the future.

Plan for a Lifetime

You want to plan with reasonable confidence for the income needed for your whole life. On the one hand, outliving one’s personal financial resources (known as “longevity risk”) places you in a situation of having to rely on others or getting by on resources provided by public programs. On the other hand, no one wants to excessively over-save for retirement.

One way of managing this challenge is to develop a drawdown strategy, i.e., to determine the best way to spend your hard-earned savings during retirement. A key component of this is setting expectations of how long you want your savings to last. Of course, knowing exactly how long you are going to live isn’t possible, so for retirement planning it is useful to think in terms of how long you’re likely to live, and to understand that the answer is a range of probabilities, not a single number.

You can find helpful information about lifetime income and longevity risk on the American Academy of Actuaries website, including the Actuaries Longevity Illustrator. The Illustrator is a simple tool that shows you the likelihood that you (or you and your spouse or partner) will live to various ages. You only need to answer a few simple questions about your health and personal demographics, then it will graphically illustrate, in multiple formats, your longevity picture. The goal of the Illustrator is to make it easier for you to make your drawdown plans and enjoy a successful, worry-free retirement.

Here’s how it works. With a few clicks of a button, the Illustrator generates a report you can use on your own or share with others that shows the probabilities of living for a specified number of years from a starting age that you initially specify (your “illustration age”). For example, here’s one of the charts for a hypothetical couple, “Tom and Jill,” both non-smokers in excellent health at age 65 (the illustration age) in 2018:

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As you can see, Tom and Jill have a 50 percent chance of both living for almost another 20 years and even have nearly a 10 percent chance of both living until age 95!


When reviewing your lifetime income needs, use the Actuaries Longevity Illustrator to understand the very substantial possibility that you’ll live beyond life expectancy age. Plan for a lifetime – including one that could be much longer than average.