Hi Everyone,

A big part of financial planning are retirement analysis and retirement projections. There is all that software available projecting on how much money you have to save on a monthly basis to be safe for retirement. Or on the other hand, it projects how much money you can take out of your account until a certain age, your presumed day of death. It also projects the probability of all of it.

I am not too fond of these projections since in my opinion it gives people a wrong sense of security. I do the projections for my clients as well, but I am using them mainly as a guideline to ensure my clients are on the right track.

The reason I feel these projections need to be looked at with caution are the following:

• When working with clients in the wealth accumulation phase, often their retirement is 20 to 30 years in the future.

• In addition, retirement will likely last 30 years with a life expectancy of 95 years

Looking at the mentioned facts above, I believe it is impossible to predict the future so far in advance, and one percent change in the rate of return or the rate of inflation will make a huge difference. Therefore relying on a number is very dangerous.

I prefer to make sure that a client is on the right track toward reaching their goals. Equally important to me is that the assets are diversified in and outside the financial markets just to make sure not all eggs are in the same basket.

Please feel free to comment.

Cheers,

Patrick