7 Retirement Planning Factors You Cannot Predict

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Subtitle:  How not to waste your time planning for retirement

Often we are told to ask the question, “Will I have enough for retirement?”  On the surface that certainly is a valid question.  However, the younger a person is the more variables exist that make the equation too complicated to properly calculate.  As a thirty-something year old male, I have come to realize that most of my wondering “will I have enough for retirement?” has been almost a complete waste of time.  Here are some retirement planning variables I believe we cannot either know or control:

1.  Social Security

Right now I chuckle to myself when I read the asterisked segment of my social security statement.  Here is my translation.  “Hi, Mr. Ford, US Government here.  Just wanted to let you know that the dollar amounts we are writing on this paper mean absolutely nothing.  In fact, we don’t anticipate having the necessary funds to pay you the stated amount.  Have a lovely life.  P.S. We are happy to continue receiving your social security payments.”   In the future I suspect that giggle with turn into a scowl.

2.  Rate of Return

Should you plan to get a 12% rate of return?  Is 6% more accurate?  Should you split the difference and go with 9%?  Regardless of the estimate you use, there is a good chance you are going to be wrong.  Sure, you might save a million dollars, but that still might not be enough.  Your asset allocation will influence you rate of return, but you still cannot know what return you will get.

3.  Inflation

How much will $1 be worth 30 years from today?  Will a Big Mac cost $15 and a gallon of gasoline $25?  I don’t know.  Do you? 

4.  Retirement Age

 The first financial advisor I met with at the age of 21 asked me when I wanted to retire.  What an impossible question to answer.  Now more than a decade later I don’t think I am any closer to answering that question.  I’m not even sure if retirement is the goal of life.  Will I have a job I love?  Will I hate what I do?  Will I be healthy?  Will my wife be working? 

5.  Activity During Retirement

 When (could we even say if) I retire I have no idea if I will be sitting at home reading the daily newspaper and playing croquet or putting on a suit jacket and heading back into the office for another day of work.  If I work part time what I need for retirement will fluctuate greatly.  At this point in my life those questions only result in an “I don’t know shrug

6.  Our future income

 We impact our future income by our conduct, character, and work ethic.  However, I cannot predict today what I will be earning 20 years from now

7.  The end of time

 As a Christian I believe the things of this world will not last for infinity.  Much like Jesus, I do not know the day or the hour, but from an earthly perspective at some point there will be a generation who will not even make it to retirement.

How Should You Plan For Retirement?

Be responsible with your retirement savings.  Plan and predict.  However, don’t worry or fret because who of us can add a single hour to our lives by worrying?  Far too many people spend hours and hours trying to predict these things, but that is extremely difficult to do.  Instead focus on the things you can control.  What can you control?  We’ll that’s the topic of our post next Monday.

Any other unknown variables you think should be included on this list?


  1. gn says

    Health is the #1 unknown IMO. Will you need LTC insurance? How much will you be spending on drugs each year? Will you be healthy enough to work a little from, say, 62-67 or so and supplement other sources of income?

    After that I’d have to say taxes and government policy in general. My fear is that when thing get bad, the government will invent new ways of confiscating money we thought was “tax free” (read Roth IRA) or invisible (read conventional accounts). Something like a VAT tax would do the trick without breaking any explicit promises about retirement accounts.

    BTW I like ESPlanner for retirement planning. Consumption smoothing is a very powerful concept, although it also suffers from the “unknowns” problem.

  2. says

    I don’t think we should rely on social security either. If we do get anything, we should just consider it icing on the cake. Like you said, we should focus on the things that we can control, like our own investments, and not worry about the things we can’t.

    And although we can’t predict what the inflation rate will be in the future, there are investments available that keep up with them. The main one that comes to mind is TIPS.

    And just like you, I’ve also been thinking lately about retirement and whether or not we should be focusing so much on it. I think too many people work so hard and try to create a plan in order to have the “perfect” retirement. But why should we wait so long before we do what we want to do? To piggyback off the earlier commenter, our health may not be as good as it is now in order to do the things we want to do. What if we found something that we love to do before we retire, that can also generate some income ? That would change the whole paradigm of retirement as we know it.

    Great post!
    .-= Darren´s last blog ..The Laziest Way To Start Investing Successfully =-.

  3. Craig says

    Yeah, Social Security does have a lot of structural issues. TIPS are a great way to offer some security with inflation – thanks for pointing that out.
    This week I read something that said, there is no such thing as working too hard, only working at something you’re not passionate about. I thought there was a lot of wisdom in those words
    Great comment! I completely agree and I’m glad that you brought up health. If only I could got back and change the title 8 Retirement Planning ….
    Sickness can be so expensive.
    I tend to agree about taxes. Governments are creative when it comes to taxes …
    @Jason (Redeeming Riches)
    If anyone was smart enough to figure out what tax rates will be in the future I thought it was you . However, since you don’t know I guess I’d concede that it is a retirement factor we cannot predict.
    @Jason W
    Thanks for you kind words. I hope I don’t keep you up all week as you anticipate next week’s post .

  4. says

    Craig, you’ve highlited all the reasons why we shouldn’t ever be too specific in our planning, especially when we’re talking decades into the future. Your point on inflation is the one that resonates the loudest with me. Even if we do have enough money at 65, will it be enough at 70 or 75 or 80 after we’ve been drawing down on it? Also, inflation won’t magically stop when we turn 65, as if to be doing so in our honor.

    We’re probably all guilty of buying into the promised certainty of retirement riches, as if we’re merely participating in a math equation. The real goal at 65 shouldn’t be all that different from what it would be at any other time of life: to walk with Christ, to lead a good life, with our needs met, in good health, surrounded by family and good friends, and participating in work and activity that stimulates and fulfills us.

    What we have today is a grotesque money chase affectionately (mis-)named “retirement planning”.
    .-= Kevin@OutOfYourRut´s last blog ..7 Reasons Super Bowl Monday is THE Day to Start a Diet =-.

  5. says

    We’ve got no security in Social Security :). Obviously, we can’t rely to it although there are always a shift just like our economy. Planning a retirement should always be a worthwhile task. I don’t focus much on difficult factors too, which will always exhaust you anyway and is pretty hard to measure.

  6. Paul Blart says

    These are great tips. I would tell anyone to discuss many of these points with their adviser. I think it’s important to start on a retirement plan early. My 401K took a hit the past 2 years. I talked to several financial investors. Tried a few strategies but finally found one that worked for me. Right now I am into annuities and got a strategy from Annuity Rates . So anyone interested in a sound retirement plan should definitely check them out.

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