There is a commercial on TV for Prudential Insurance. It states that while people are living longer, the retirement age has remained the same. Thus you have more retirement years. The spokesman asks “how will you have enough money to enjoy all those years?”, the inference being that Prudential knows how to do that. Excuse my inherent cynicism but this Holy Grail lies in knowledge of what the future will bring. I’ll admit that it is a noble question for the normal person, and one we’d like to have the answer to, but there are so many variables that it is impossible to give any certainty.
Any attempt to solve this question must answer:
1) How much are you starting with?
2) Will that grow before you retire or not, and what to?
3) What age are you retiring at?
4) Do you have sources of income that will continue?
5) How long will they continue?
6) What investments do you have?
7) What is the assumption for the return for each?
8) How definitive and variable is that assumption?
9) Will those assumptions change?
10) How much will the things you need and want increase in price?
11) When will you die?
……………etc. etc. etc.
You get the picture. Any changes to one of these variables changes the outcome. It’s like life – very complicated. Now I suppose that Prudential can show you how different changes in different parts of this equation will affect the outcome, but they can’t assure you of which ones will change and when.
That might help you to understand what range of lifestyles your retirement could be and how different positionings of investments and their returns could affect you, but it’s just an exercise with no surety of outcome or pertinence. Unfortunately much of this is pure luck of the draw – back to my casino analogy. What is the economic and market environment during your life – before and after retirement? When were you born? Where are you located?
So we end up with many more questions than answers and that’s my point. In searching for answers we just open up doors with questions and that’s just the way it is.