We have statistics!
If only we had a crystal ball that could show us exactly how much money we would need to save for retirement. Or perhaps a longevity lens to gaze into the future and know how long we will live. Wouldn’t it be nice to know what’s in store? We could save, save, save – or spend like there’s no tomorrow, if in fact there wasn’t going to be one. Maybe, or maybe not. The truth is, we can’t know the future, but when we’re talking about financial planning, we can use our experience to become smarter about it.
Websites like Livingto100.com, where you can find out how long you’ll live according to their medically-based “Life Expectancy Calculator,” make for fun spare-time pursuits, but they are hardly financial planning tools. “It says I’m going to live to be 85? That’s good news! Hmmm… What if they’re wrong? But, what if they’re right? Will I outlive my money?”
In the world of financial planning, we employ a different kind of science, one that’s not medical, but rather statistical. We use probabilities and “what if” scenarios to help people like you know what your future may hold if you live a long time, if the markets go up or down, or if and when you dream of retiring. These scenarios provide the best-case scenario we all want, the worst-case scenario we’d rather avoid, and various scenarios in between. The best part is that the simulations provide the probability of each of them actually happening based on projections of market returns, tax rates, inflation and, most importantly, your changing needs over time.
Understanding comes from gathering as much information as possible, and often so do prudent next steps in the planning process. In many cases, these simulations can bring peace of mind, a sense that you can live your life the way you want. When we spot the need for some modifications or planning opportunities, we can work with you to model possible adjustments to your plan.
This kind of financial planning can be really difficult to do for yourself, even if you have the analytical tools close at hand. Perhaps that’s why so many people save and just hope, which may not be the best strategy. By now you may have guessed that’s why we’re here: to look into your future with something far more reliable, statistically speaking, than hope, a crystal ball, or a longevity lens. We take the experiential view of markets, plus your goals and your time frame, and combine them into a strategy. How close the markets allow us to come to these projections, well, that’s not up to us. But understanding the likely range of scenarios in advance may be the next best thing to certainty.