Newsweek has quite an interesting take on retirement planning, claiming that the math behind retirement planning should be carefully studied since they don’t really factor in what happens during retirement.
The article claims that many retirement planning calculators are simplified to the point that most don’t factor in the shifting expense demands of retirement based on the four stages:
1. Early retirement, when travel, home improvement, hobbies, and new wardrobes can raise expenses beyond workday levels
2. Midretirement, when people (and their spending) typically slow down
3. Late retirement, when spending and activity slows even more
4. End of life, when spending for health care and personal assistance can use up what’s left of a retirement kitty
Retirement, based on this means that it is typical for retirees to spend less. Most simplified planning and calculators would factor in the typical yearly expense and compound with inflation over the years. This, they say, affect how people configure their saving and investments prior.
Makes a lot of sense, really. However, the fact of the matter is, not everyone’s an accountant and not everyone can understand actuarial science. So why can’t we simply compute for the worst case scenario and plan for that?
