Page 108 - Ready Set Retire

Stephen J. Kelley

because nuclear particles are governed by the laws of physics,
and strict laws of nature will provide consistent results.

Financial income planning, however, has no such constraints.
Things that influence economics include factors entirely
random and unpredictable. How, for example, could any
software algorithm predict a tech bubble and an attack on the
Twin Towers would occur simultaneously? Or that the
legislation that effectively insulated bank depositors from
aggressive speculation of their deposits (Glass-Steagall) would
be repealed after 60 years of working spectacularly well? How
can inputting variables from the past predict what might
happen going forward? For example, how could anything that
happened in the early years of the 20th Century have anything
to do with what might happen in the 21st?

It is so much different than nuclear physics it’s laughable.
Randomness is, in a funny way, predictable in physics. We can
bombard particles with specific radiation, heat something up,
cool it down, compress it, expand it, and a thousand other
things we know about, and measure the results in a controlled
environment. If there is one thing we know about the financial
world, it is anything but a controlled environment.

The other thing missed by people who employ Monte Carlo
planning for retirement planning is the statistical element that

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