With the Actuarial life expectancy method, actuarial tables are used as part of the present value calculations for certain future income resources (i.e. Other Savings and Anticipated Benefits) and spending goals (i.e. Retirement Expense Goals) on the Household Balance Sheet. Instead of assuming a specific end of life expectancy for the principals of a plan, the survival probability of each principal is determined for each year up to the maximum age covered by the actuarial tables. Cash flows associated with a principal are then haircut by that principal’s survival probability for the given year the cash flows occur.
With the End of Life expectancy method, a specific age of death is entered for each principal in a plan. Instead of applying a survival probability haircut to each year’s cash flows, the cash flows associated with a principal can only occur up to that principal’s age of death.