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The thing I find most difficult about retirement planning is that assumptions about market returns and inflation always seems to overwhelm all other factors by
by 0xffff2 6y ago
The thing I find most difficult about retirement planning is that assumptions about market returns and inflation always seems to overwhelm all other factors by a large margin. I typically assume a 4% inflation-adjusted return for planning purposes (7% average return minus 3% inflation), but half a percentage point in either direction could leave me broke shortly after retirement or wealthy beyond all need.
I guess partly this is just because I'm still 30+ years from retirement, but does anyone have any advice on how to account for the incredibly wide range of possible outcomes based entirely on factors that are impossible to accurately predict?
- deleted 6y ago[deleted]
- singingboyo 6y agoSimilar situation, but the way I figure it, it's best to err somewhat on the side of caution. Aim to save more than you expect to need, so that a bad return is still enough. The thing to remember is that if you are somehow wealthy beyond need, you can just retire. You don't have to keep working if you're financially stable earlier than expected.
- scubakid 6y agoErring on the side of caution and conservative estimation is usually a good thing. And within the next few weeks, I hope to be implementing a Monte Carlo simulation mode which should help to account for the fact that many of these variables really follow their own distributions. Hopefully this will help make it clearer what the chances of success are given a broader range of scenarios, events like market crashes or longer downturns, etc.