4 Dangerous Retirement Assumptions (And How to Fix Them Before It’s Too Late)
Most people don’t realize it, but every plan, every decision – even every belief – starts with an assumption.
That’s not just philosophy. It’s practical.
Every time you act, you're working off a set of things you believe to be true. And if even one of those assumptions is wrong? The whole plan can fall apart – especially when it comes to something as important as retirement.
Take a basic example: You assume you’ll retire someday. You assume you’ll live for a while after that. Fair enough. Well, that's understandable! No reason to plan for retirement unless you plan to actually retire, and enjoy yourself afterward.
It’s the other assumptions – the ones buried deeper – that can quietly sabotage your financial future.
Because even the most carefully considered retirement plan can collapse if it's based on flawed assumptions.
Let’s look at why that happens – and how to avoid it.
Let’s look at just one example (and the consequences)
Take a basketball game.
Before you roll your eyes wondering how this relates to retirement planning, just stay with me a moment. This will be quick.
One of the fundamental actions in basketball is dribbling the ball (though, that seems to have become less and less important than when Larry Bird was still playing…).
For the ball to bounce back up when you dribble it, the ball must be round.
If the ball were square or oblong or any other shape, you wouldn’t be able to dribble it. Watch a punt in football that nobody catches. The football isn’t round, and when it hits the ground, it will go in any random direction.
So, the basketball has to be round so that it will bounce back up towards the players hand to keep dribbling it.
If you assume that a square ball will work for dribbling in basketball, you’d end up in a situation in which you wouldn’t be able to dribble. It would go in every other direction except back to the player’s hand when it bounced off of the ground.
And don’t get me started on how bad it would go to try to bounce pass a square basketball…
People don’t often think about the assumptions that they start with, but if you start with bad assumptions, you will get bad results.
So, back to retirement planning.
What are some of the bad assumptions that people make in retirement planning?
There are a number of common bad assumptions in this area that we’ll go over, and while we discuss them below, think about how many of these bad assumptions that you have been making.
The first four bad assumptions that we’ll discuss come from trusted advisor Christine Benz. We’ll discuss those assumptions along with my commentary.
The first assumption that Benz mentions is that investment returns will be robust.
Now, if you’ve been paying attention to how investors have been freaking out over the last few weeks, you should be completely over this assumption, but many people live on with this assumption.
Why? Because it’s easier to be an ostrich sticking their heads in the sand hoping that all the bad stuff will go away than it is to admit that they were wrong and change their retirement planning strategy to ensure a safe, stable, and prosperous retirement.
The fact of the matter is that investment returns aren’t guaranteed, and we’ve seen horrible crashes more than once over the last century just here in the U.S.1
Because of this volatility, you would be smart not to bet the farm on that assumption.
The second bad assumption Benz provided is “Inflation will be benign.”
I don’t mean to beat a dead horse (wait a minute, yes, I do. I want you to get this idea. It’s important!), but inflation has not been benign over the last few years.
It has been horrible, and the fact of the matter is that it’s likely that prices will rise as Trump works to turn the economy around.
And that’s not even including the possibility that a future Presidential administration won’t be a repeat of the awful economics that we saw in the last administration that, according to the official CPI Inflation Calculator, saw the U.S. dollar lose over 19% of its value in just the last five years. And that's just what the bureaucrats are admitting to!
That’s a massive loss of purchasing power in such a short period of time, and it’s possible that we could see another, equally damaging, over then next decade or two.
If even one of these assumptions proves false, your entire retirement plan could be at risk. Protect yourself with real assets that don’t rely on empty promises. Learn how precious metals can help.
If those ideas stress you out, I hate to break it to you, but Benz had two more bad assumptions to share.
More bad assumptions about retirement
The third bad assumption that Benz shared is the idea that, “You will work past age 65.”
Maybe you will. Maybe you won’t.
The fact of the matter is that in the economy that we’ve had over the past few years, some companies have been accused of targeting those nearing retirement age for layoffs, and there are reports that workers aged 50 years old and older are having difficulty getting new jobs to replace that income.2
And that’s assuming that you aren’t one of the unfortunate people who have to deal with a health issue that prevents them from working up to and after 65.
Betting that you’ll be able to keep your job to 65, much less after 65, isn’t a safe assumption to bet on if you want to retire in comfort.
You would be smart to be more aggressive in your retirement planning now in case you can’t work up to and after age 65.
Benz’s fourth assumption? It’s “You will receive an inheritance.”
Sorry to break the news to you, but baby boomers are living longer, meaning that they’re using up their assets during their retirement years and will have less assets to pass on to their children and grandchildren.
If you receive an inheritance, that’s great. Just don’t make your plans based on it because it’s rather unlikely to actually happen.
And there are still more bad assumptions that you must know about
Nevin E. Adams, J.D. with The American Society of Pension Professionals & Actuaries notes several other bad assumptions to avoid with retirement planning including assumptions about how long you’ll live, how much things will cost in the future due to inflation and other factors, what taxes will be like for retirees when you retire, and how you’ll spend money differently (you’ll likely spend more on health care than in your younger years).
And Mark LaMonica, CFA points out that if you will still have a mortgage when you retire, you’ll need even more money to make sure that you get that paid off to make sure that you have housing. Don’t assume that you can plan the same as someone who has paid off their home.
As you can see, there are a number of dangerous assumptions that many, many people start with in their retirement planning, but you don’t have to make those mistakes.
Think through your retirement plans, being sure to avoid these bad assumptions, and as you reevaluate your retirement plans and make smarter plans, also look into diversifying into precious metals to make sure that you have a rock solid base in your retirement house that can withstand whatever comes your way in your retirement years.
You can start your research into diversifying into precious metals for retirement planning by requesting our free Precious Metals Information Kit.
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Sources
- “What We’ve Learned From 150 Years of Stock Market Crashes.” https://www.morningstar.com/economy/what-weve-learned-150-years-stock-market-crashes
- “If You’re Over 50, Chances Are the Decision to Leave a Job Won’t Be Yours.” https://www.propublica.org/article/older-workers-united-states-pushed-out-of-work-forced-retirement
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