Page 109 - Ready Set Retire

Ready. Set. Retire!

actually can be measured and predicted with scientific
precision: mortality. The main unknown that creates the most
problems for financial planners is lifespan. How long one must
plan for has a huge impact on how you plan. For example, if
you had $500,000 in your retirement account and you knew
you would only live for 18 years, would that change the way
you approached the plan, vs., say 30 years? It would! And this
is something that Monte Carlo planning ignores. However, it’s
so reliably predictable it has made trillions of dollars for the life
insurance industry for hundreds of years. We believe it should
be the foundation for retirement income planning, since it
deals with the very problem we are trying to solve: never
running out of money.

Lest you believe I am just making up the ineffectiveness of the
Monte Carlo approach, consider this. No government
regulating body, including FINRA, the SEC, the CFPB, or any
state finance department will evaluate, let alone certify, these
software programs. But Wall Street advisors glommed onto
these planning “tools” (Monte Carlo and the 4% Rule) because
it’s all they had. Really. No one knew. No one had a clue.
401(k)s, if you will remember, were only around a decade old
when the 4% Rule was created. How on earth could anyone
give it any credence, especially those people putting their entire
retirement security on the line?

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