A client called us recently, asking us to guarantee that he wouldn’t run out of money in retirement. He also wanted to ensure that he could do everything he wanted during his retirement; travel being one example he gave us.
Knowing that we’re not going to run out of money is a guarantee we would all like to have. However, it is also a guarantee nobody can ever make. Why? Because there are so many variables when it comes to life, retirement, and our finances.
We can do everything right and still run out of money. It’s like living on salad and hoping you will live to be a hundred. Eating healthy will give you the best chance of this by being the healthiest you can be, but there are still no guarantees that you’ll live that long. On the flipside, we all know someone who has a grandmother or grandfather who smoked a pack of cigarettes a day and drank alcohol every night and still outlived everyone!
The realisation that there are no guarantees can either be liberating or limiting. Some people might throw their hands in the air and say, “Well then, I’ll just eat cheeseburgers for the rest of my life.” But of course, we hope people will have a slightly more mature approach. Nobody thinks the lesson to be learnt here is to smoke a pack of cigarettes a day and then you’re guaranteed to live forever. We accept that there are outliers in every situation; exceptions to the rule.
For some reason, though, this doesn’t seem to apply when it comes to money, and many people have a pass or fail mentality when it comes to their finances. But as we said before, there are never any guarantees. You can live a completely sheltered life where you don't leave the house, trying to avoid bad luck to ensure a long life. But that’s not exactly living. Likewise, there are no guarantees that you won’t run out of money during retirement. In fact, the only way to guarantee that is to never stop working; to never retire.
So, our answer to this question is: all we can do is look at all the variables, think about what our clients want to achieve in their retirement and their lives, and from that we can tell them when we think they can retire, based on their financial situation.
