Your Retirement Plan is a Sucker's Bet
For those unfamiliar with sports betting, a parlay requires you to correctly predict multiple outcomes, and you only win if you get ALL of them right.
An 8-leg parlay means predicting eight different results perfectly. Miss even one, and you lose everything. The odds of winning an 8-leg parlay are 3.9 out of 1000.
Want to know what traditional retirement planning really is for most people?
It's betting your entire financial future on something with approximately a 0.39% chance of success.
Think I'm exaggerating? In my book, Let's Retire Retirement, which is out on Tuesday and you can pre-order now, I share variables you'll need to correctly predict in order for your retirement planning to be successful. Here are some of them:
What age you want to retire
How much you willl spend annually in retirement
What inflation will average over the next 30 years
What tax rates will be in the future
How long you (and your spouse) will live
What your rate of return will be each year
How much you'll receive from Social Security (if anything)
If you'll leave money behind or spend it all
It is much more of a gamble than what I am suggesting, as you will have to accurately predict many of these variables, like inflation, rate of return, and taxes, annually. For example, let's say you need 7% per year for the next 20 years to amass what you need to retire, and then the stock market declines by 20% the year before you had planned to stop. That would hurt you and your plan quite a bit.
Oh, and don't forget the assumptions that many of the experts don't mention: Will your parents need financial support? Will your kids need help buying a home? Will long-term care costs devastate your savings?
The financial services industry has convinced millions of people to organize their entire lives around correctly guessing the outcome of variables that are impossible to predict.
It's like placing a complex sports bet and then living your life as if you've already won.
Meanwhile, you're sacrificing family dinners, postponing vacations, and missing precious moments with your kids—all based on calculations that have about the same probability of being accurate as hitting that 8-leg parlay.
There's a more straightforward approach: embrace the one variable you actually have some control over—how long you work. When you plan to do meaningful work beyond 65, most of these impossible-to-predict variables become far less critical to your financial success.
