@article {Dunhamjwm.2020.1.120, author = {Lee M. Dunham and Kenneth M. Washer}, title = {Using Life Tables for Retirement Planning}, elocation-id = {jwm.2020.1.120}, year = {2020}, doi = {10.3905/jwm.2020.1.120}, publisher = {Institutional Investor Journals Umbrella}, abstract = {This study examines two methods for determining retirement accumulations. The first method assumes that the client will live to a very old age. This method may be appropriate for clients who are highly risk averse and/or want to self-insure the risk of outliving their savings. The second method employs life expectancy tables to weight retirement cash flows by survival probabilities. The target accumulation under this method is much lower and more easily attainable for clients than the first method. The primary drawback of the second method is that, from a statistical point of view, about 55\% of clients will outlive their savings. Because of this, risk-sharing, perhaps through a deferred life annuity, would be advisable unless clients have other viable options available (e.g., family support) in the event that their savings are used up. We believe there is value in both methods and that some clients will prefer a higher, more ambitious target, whereas others will prefer a lower, more attainable target.TOPICS: Pension funds, retirement, risk management, social security, wealth managementKey Findings{\textbullet} We present an alternative method of estimating retirement accumulation needs that uses life expectancy tables to weight retirement cash flows by survival probabilities.{\textbullet} We compare our estimation results with those of the common alternative method of just subjectively assuming that an individual will live to a very old age with 100\% certainty.{\textbullet} The total estimated retirement needs are significantly lower under our method although these funds will likely only cover the retiree to life expectancy.}, issn = {1534-7524}, URL = {https://jwm.pm-research.com/content/early/2020/09/01/jwm.2020.1.120}, eprint = {https://jwm.pm-research.com/content/early/2020/09/01/jwm.2020.1.120.full.pdf}, journal = {The Journal of Wealth Management} }