What If Your Retirement Projection Is Missing the Most Important Details?

We got some work to do.

I do think that oftentimes retirement calculators in general, whether it's ChatGPT or the tools that Fidelity has on their website, that Schwab has on their website, even one of the tools that we use, they're all essentially using Monte Carlo simulators, and that is exactly what it sounds like, Monte Carlo being one of the biggest gambling places in the world.

It's plugging all of your information into the software.

You're putting your age, when you're going to retire, how much you're spending now, how much you're saving in your retirement plans now, what you're invested in, how much risk you're taking, and you're basically setting a projected rate of return.

And then what this software does is is it's rolling the dice, theoretically rolling the dice and saying, year one, your return is X.

Year five, your return is Y.

Year 10, it's Z, and so on and so forth.

So every single year, it's creating a hypothetical return.

And then at the very end of it, some of them do things differently.

I've seen some that gives you three scenarios where it says, if the market underperforms the historical average that we've seen, here's your chance of success.

If it does pretty much right on average, here's your probability of success.

And then if the market overperforms, here's your probability of success.

So it does a good job, in my opinion, of giving you an idea of what retirement can be like.

What Lawrence and I use the program for is, know that's our starting point for you know here's everything you said you had here's how much money you have here's how much you said you want to be able to spend and the answer for some people is well you know it's five thousand dollars a month but i'd like to have more but they don't really know how much higher that number is so it can give us a good idea of do you have enough money for retirement? It gives us an idea of a spending range for those people that are unsure of it, but it doesn't actually give you any actionable steps for here's exactly how you make it happen.

And that I think is a pitfall because it gives you this false sense of security of saying, hey, this computer program said I can make it.

I have $1 million.

I have $2 million.

I'm spending $6,000 a month.

This computer program says I can make it.

I don't need to do anything different.

I'm just going to keep everything going.

And that can lead you to taking on more risk than you need to take.

It can lead you to taking on less risk than you need to take.

It can lead to not taking account for taxes.

It can lead to also not setting up your income in retirement and and that's one of the biggest things that that people miss is the myth out there that once again i i feel has been perpetuated by the the mainstream financial advising you know fidelity vanguard schwab t row price they all put these studies out there that says you know you can withdraw 4% of your money or 3% of your money every single year.