Page 110 - Ready Set Retire

Stephen J. Kelley

Now Monte Carlo simulation (I call it Las Vegas planning), has
for several years maintained that you can take about 4% of your
savings each year with a 3% annual inflation increase and have
a 90% chance of not running out of money before you die.

And somehow that’s been acceptable. Only 10% of the time
will you run out of money! 10% of the time you are 100% up
a creek! 10% of the time you are eating cat food, at every meal.
10% of the time you don’t get enough medicine, ever again.
10% of the time you freeze in your home...for the rest of your
life (you are out of money...get it?). It does not mean you just
cut back 10%, which is what some would like you to think.

But the people employing these programs are risk-based
(risky?) planners, meaning they are used to taking risks (read:
gambling) with your money, so in their minds 10% isn’t so bad.
And it’s really all they have. Their livelihoods are based on
keeping you invested. And this model worked well (for about
eight years!) until the last decade, when reality reared its ugly
head.

Since the turn of the millennium we’ve had two total financial
meltdowns within a single decade, with another potentially
right around the corner, and all of that past data is being shown
for what it is: nonsense. When you have frequent and drastic
market downturns income planning isn’t so cut and dried. A

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