Recently I was doing an annual review for a client. She has many different variables for her money and retirement. She was going to retire at 65, but she decided to take a buy out at 55. She doesn’t know if she’ll go back to work or when she’ll go back to work. Needless to say this moving target makes it a little bit difficult to plan.


The one thing that all financial advisors rely on are probabilities. The biggest factors I see most financial advisors rely on is 3 things…

How much do you want in income off of your retirement savings?

How long are you going to live?

What rate of return can you expect?


When you dig into the numbers and variables your retirement can be a little more difficult

to predict…

  • Inflation

  • Pensions

  • Cost of living adjustments

  • Return on investments

  • Social Security

  • Costs of healthcare

  • Taxes

One of the biggest sources of income retirees are counting on is social security. There are two main variables that are hard to predict with social security that I don’t see many financial advisors talking about.


1- In 2034 the Social Security Administration has said that it is going to cut social security payments by 21%. Have you had a conversation of how you will fill this 21% gap that is coming in 2034?

2- What is the cost of living adjustment that the SSA is going to give you on yearly basis? Will it be 1%, 2% or 3%? Historically this number has come in at 42 average of 3.73% and a 10 year average of 1.64%.


The paradox, does scenario number two matter when in 2034 social security recipients will be getting a 21% pay decrease.


Inflation has sored past and present. Inflation has 102 year average of 3.14% and a 10 year average of 1.68%. We’ve even had huge deflationary periods where inflation has drop -10.5%. We have also seen inflation rates as high as 13.5% These inflation rates effect the cost of goods such as food and travel. But, inflation also effects cost of living adjustments on pensions and social security.


The other big variable when it comes to inflation is healthcare. The problem is the cost of healthcare is rising at 8% per year. This is more than twice the average inflation rate. As we age we spend more and more money on healthcare. When the time comes for you to spend time on healthcare what will the costs be?


The key is understanding that there are a ton of variables and averages matter, but your average and experience are personal. You need to stress test your retirement to see how you will fair given the different scenarios.

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