Personalize Your Lifetime Planning Period (LPP) Assumptions

In our December 31, 2025 post,
we referred to a three-step process that we encouraged you to use to
replace the default LPP assumptions in the Actuarial Financial Planner
to refine and personalize your Funded Status measurements. Last week, Advisor Perspectives published my article entitled, “Use This 3-Step Process to Develop Better End-of-Life Assumptions for Your Clients.”
We include the three steps in this post from that article. A link to
this article is also available in the “articles” section of our website.Three-Step Process for Determining Reasonable LPP AssumptionsStep 1Estimate
client life expectancy (single or for each member of the couple) using
the 50% probabilities of survival from the planning horizon of the ALI.
Also estimate life expectancies from three or four other reliable life
expectancy calculator tools available on the website that generally
consider more factors than the ALI. Such tools include:One
of the related benefits to your clients associated with this step may
be to encourage them to engage in healthier lifestyles to increase their
life expectancies.Step 2Compare the 50%
probabilities of survival life expectancies from the planning horizon of
the ALI with the average life expectancy results obtained from the
internet calculators. Determine appropriate adjustments in your client’s
current age for significant differences. This may look like adding
years to the client’s current age if internet life expectancy results
are generally shorter than ALI results, or by subtracting years from the
client’s current age if internet results are generally longer.For
example, if the ALI indicates a life expectancy for a 65-year-old male
in excellent health is 23 years but the average of internet calculators
supports a 25-year life expectancy, then subtract 2 years from the
male’s current age. Do the same thing for a spouse. I call these age
adjustments “age setbacks” or “age set forwards.”Step 3Go
back to the ALI and enter adjusted ages from Step 2 without changing
the health status or gender. Update the results and take the adjusted
results from the 25% probability of survival from the planning horizon
section. This will give you one longer-than-life-expectancy LPP for a
single client or four LPPs: “Person 1,” “Person 2,” “At least one
Alive,” and “Both Alive” for a married couple.The article
includes examples of how this process works for two couples with the
same ages but different health statuses and habits.It is
important to remember to follow the warning highlighted in red at the
bottom of the AFP spreadsheet when overriding the default assumptions.