Retirement planning is about planning for an unknown life. It is more art than science, in my opinion, as it requires you to make many assumptions.
It requires you to ask the question, “When will I die?”. If it’s tomorrow, I don’t really need a retirement plan, if it’s 70 years from now, I better start saving or expect to eat tuna and noodles in my old age.
You then need to predict economic factors which include future stock market returns, sequence of returns, interest rates, inflation rates and political outcomes.
Everyone is generally terrible at predicting such things.
Most difficult is having to predict ourselves. What will make us happy? What do we really want for our lives? This intuitively seems much easier than making economic or political predictions. But science tells us otherwise.
Harvard psychologists’ studies have shown, “when people try to estimate how much they will enjoy a future experience, they are dependably wrong.”
We barely know ourselves yet are asked to predict the unknown. The longer our retirement horizon, the greater our errors become magnified as they are compounded over many years.
So why bother? Because retirement planning is faith in action. Faith in yourself. Faith that you have a future worth planning for.
You must embrace the fact that there is a lot you don’t know and can’t predict. You must literally walk in faith or live in fear of the unknown.
“If your goal is to be comfortable, chances are you’ll never get rich. But if your goal is to be rich, chances are you’ll end up mighty comfortable.” T. Harv Eker