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Within the archives of HD is this comment:
“I built a spreadsheet and proved that the math worked for me and my wife with our facts and assumptions.”
Making assumptions means accepting something as true or certain without proof, often based on your own beliefs, past experiences rather than on concrete evidence. You can’t prove an assumption, but you can test it.
The exact subject associated with the above comment, is not important. Suffice to say though that it related to lifetime retirement income security – important stuff. The validity of those assumptions will not be tested for many years.
People sometimes make assumptions (sometimes unconsciously) that steer them toward the answers they want. This tendency is linked to cognitive biases. For example, our emotions or goals can shape how we interpret information—so we may make assumptions that favor our preferred outcome.
Planning for years in the future with many possible variables requires assumptions, nothing can be known with certainty.
How did you go about setting your assumptions? How did you become comfortable with your final choice? Have you had the opportunity yet to test those you relied on to make financial/retirement decisions?
Facts: our current pension payments (2), both with COLA’s, already more than cover our expenses and also provide for transfers into a savings account. We each also have target date funds, I have an IRA, and we’ve got approximately 2 years of expenses in our emergency fund. We are 67 and 66, so no immediate need to reduce the IRA through RMD’s/QCD’s. Neither of us is taking social security benefits yet.
My assumption: the pension COLA’s will continue to keep pace with cost increases (healthcare, utilities, food, etc.) and our SS benefits, emergency fund, TDF’s, and IRA will provide “backup funds” if or when necessary.
I have this all plotted out in my spreadsheet (my forecast), because I like messing around with the numbers, and that gives me a ready confirmation that “the math” works for us now as well as into the future. Another earlier writer mentioned “margin”, and I believe our margin is sufficient. Time will tell, but I assume all will work out just fine.
Not much risk with assumptions there. You are in a good and unique place for sure.
Sounds like former employees of a government entity or college.
Good guess — both long-time public school educators.
Many years ago, when borrowing against my home for seed money to start my business, the bank required a business plan. I provided one with very modest growth forecasts—even those indicated I would become a multimillionaire within ten years. The bank found my plan conservative and reasonable. Reality, however, had other ideas and laughed heartily at those assumptions. I never became that multimillionaire. So much for forecasts and assumptions.