The Hidden Assumption in Every Retirement Calculator

Thought provoking episode!

@Aubrey Williams and @drBobby I have a technical question for you. Do you think it's reasonable to consider the joint probability analysis:

(Probability of not running out of money at age X) OR (Probability of not surviving to age X)

For ages like X=80 or 90, the second term is pretty big which would relax the pressure on the first term. For example, the CDC stats show that a 57 year old male has ~30% chance of surviving to 87. If their financial plan shows a ~70% chance succeeding at 87 years old, then the joint probability of "success" is 90%. The assets needed for such a plan are much less than those of a plan with 90% success at age 90 or 95.

Perhaps this could offer another type of "guardrail" when a financial plan is stressed under market conditions?

Overall, I felt this was a decent episode, but I felt the way that Dr. Bobby approached genetic testing for APOE as too blasé. While the literature around APOE testing shows that most people who choose to undergo testing don't regret it, even those who end up finding out they are high risk, there are still elements to making this type of decision that could be best guided by a genetic counsellor. Most of the nuance around this type of testing is not well handled by most primary care practitioners.

If you found yourself interested in doing APOE testing, I would suggest speaking with a genetic counsellor to ensure you are truly giving informed consent and have a full understanding of your risks and the implications of testing.

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Great discussion in this episode! And thanks for sharing your EconoME Powerpoint slides, Frank. I really appreciate your grounded perspective.

This episode prompted me to look at my family history. 85 years is pretty realistic for women in my family. I am a retired teacher and FI at 55, so that tells me I've got 30 years I can pretty much count on if I take care of my health and avoid any car crashes. I am a natural saver, however, this conversation and the more grounded data that Frank provided gives me more courage to lean-in and spend on experiences, new learning, and giving back, knowing that we will have enough later when we need it. It also encourages me to spend/invest more money and time on my health, to boost my quality-of-life in the next 30 years. I have LTC included in my teacher pension, so I know that it's there for the last 5 years if I need it, which probably means my investments could last beyond 85, if necessary. Now, thanks to your reassurances, it's time to worry less and live more!

I wish there had been some discussion of the happiness factor in the latter years of life, or at least the lack of fear. I'm really enjoying the benefits of being flush in retirement: having new experiences, giving when I'm inspired, and most of all, not worrying about money any more. I'd like to continue that, even when my physical being starts to wither.

When I started saving, life expectance for women was 75. Now it is 82. Maybe there isn't a pill for cancer now but at one time there wasn't one for HIV either, and breast cancer was a death sentence. It's not that big of a stretch to turn 82 into 90, more if you pursue a healthy lifestyle. I understand adjusting along the way but I want to prevent financial fear from creeping into my geriatric years when I suspect there will be new fears to tackle.

You may say I have oversaved although I would counter that the market has been unexpectedly kind to me. I hear I can't take it with me and I'm OK with that because I trust my heirs to do what's right. I have the benefit of it while fearlessly alive, and others will have the benefit of the leftovers.

It is really quite interesting that the podcast discussion included a really obvious example of "guardrails" that I think has been sitting in front of us all along without us even realizing it. Dr. Bobby, in the context of discussing his fitness routine (e.g., training for Iron Man), mentioned that he cycles. In the past, he cycled outdoors and then nowadays he mostly cycles indoors. The rationale: the risk of wiping out from the bike on the road/trail has consequences which are too catastrophic, should they occur. As a result, he has gone from cycling outdoors to mostly indoors.

This is really a textbook example of a concept called "operational risk management." Basically, there is a grid with two axes: likelihood of occurrence and severity of outcome. Is it likely that Dr. Bobby will wipe out while riding his bike outside? Probably not. But he has assessed the severity of outcome (that at his age such an accident could potentially put an end to his ability to exercise entirely) as such that even with a low likelihood of occurrence it is still prudent to proactively avoid the possibility.

And isn't that really what "guardrails" are all about? The idea that we would be flexible when it comes to things like what we eat and how we exercise, but not when it comes to our retirement spending seems a bit out there. I guess another to think about it is, "would I choose a fitness routine today and stick with it for the next 40 years, no matter what else happens along the way?" Probably not.

Such an awesome episode with lots finance, health, and modeling discussed.

For myself I think the actionable takeaway was a one or two liner from @Aubrey Williams similar to his discussions on risk based guardrails, that rather than feeling like the decision is a 0 or 1, the ability to change that decision each year is one of the most powerful ones we hold. Assess your finances once a year and determine if you are ok with the trajectory you are on, and do a similar exercise for assessment of your health once a year.

I hope in the next episode Brad and Aubrey do together, that something discussed is, what decisions would you make for your finances, if you decide you are off track in a year? Some simple examples dependent on age along the journey: partially reduce discretionary spending that year, return to hobby or gig work to offset some spending, return to more part time work, and more intensely: selling a home/moving. I am definitely hoping for more depth as that's about all I can think of at the moment!

I completely agree with @jets500. Especially as a single person with no family, my only safety net is myself!

Idk I kind of think the retirement calculators are right to estimate to 90 or 95. I mean even if you go through everything and determine you’re not likely to make it to 90, what are you going to do if you find yourself past 80 and now running out of money? I mean can’t go back to work at that point, you’d end up being a burden on your children.

Although it’s been discussed before, I think they missed the opportunity to discuss lifespan vs health span, and how that should affect our projected spending late in life.

Also, the cost of long term care is often a stated concern, but statistically only lasts an average of three years.

Great episode. This is a concept I've been sharing with many. I see way too many folks work until their 65 cause they're worried about running out of money when they're 90, only to die within a year after retirement.

Fantastic episode! We use Aubrey's guardrails to determine withdrawals in early retirement, and sing his praises to all the FI people we meet. I was excited to learn about Dr. Bobby's podcast too- it sounds like it contains a lot of actionable takeaways for health. This episode confirmed our planning to the age of 100. Both of my grandmothers lived into their late 90's (one is still alive, so TBD), there is no heart disease or dementia in my family and I am very physically active. Plus, my husband is 6 years older than me and I have no children. There is a high likelihood that I will be without family in my old age- so I'll definitely want a solid nest egg to support my needs.

Another excellent episode. But the problem is bigger than just bad forecasting in life expectency. In fact, "bad assumptions and bad forecasting" is actually an endemic problem that plagues most of forecasting in personal finance, and is why many of the base assumptions in Boldin and many other calculators are garbage.

There is an objectively correct way to do forecasting that applies to all kinds of forecasting, whether in personal finance or any other domain. It was pioneered by Philip Tetlock (see the book "Superforecasting: The Art of Science and Prediction" (pub. 2015)), Daniel Kahneman, Annie Duke (Thinking in Bets) and many others in psychology and behavioral economics. To summarize in one sentence, it requires the forecaster to assess Base Rate probabilities for appropriate Reference Classes and apply them in a rigorous manner. It specifically rejects "fear-based forecasting" or "fudge factors" or rejiggering inputs to be "aggressive" or "conservative." (If you are going to do that, you are supposed to do that with the outputs, not the inputs.)

Yet most of what goes on in financial services and in those calculators is the opposite of that – its largely based on fear factors and guessing and bad ideas handed down from some guy who said something two decades ago. And the reason for that is (1) CFPs are NOT taught how to do forecasting properly – it is NOT part of that curriculum – and most other "teachings" are even worse; and (2) all of the incentives and what has developed in financial services marketing over time is to pad numbers and essentially just make things up that "sound good" or move products or schemes. In fact, AUM advisors benefit greatly by doing bad forecasting and having their clients underspend. It is no wonder that the biggest reported problem of retirees these days is gross underspending. And much of it is caused by bad forecasting using bad assumptions by advisors and calculator creators who are incentivized to do so.

This was actually the subject of my last EconoMe presentation and has been flagged by Michael Kitces, Jesse Cramer and many others. Yet bad forecasting persists as the norm in personal finance (and is even worse in many personal finance communities who "can't be too safe" so lets pretend we're going to live to 110 and the Great Depression is going to occur for the next 30 years but with 7% inflation and 15 years of full priced long term care).

This problem is not going to be solved until people start acknowledging its a problem and taking it into their own hands. Don't expect most people who promote calculators and financial products and services to be part of that solution – their incentives are all wrong, because their money is made in exploiting and/or catering to fears with bad assumptions and bad forecasting, not in doing objectively good forecasting so you can live your best life to an age you are likely to die at.

The first thing you should look at in any presentation about personal finance forecasting is whether the assumptions are based on real Base Rates and correct Reference Classes from reliable sources. Chances are they are not, starting with those highly promoted retirement calculators. If you are not controlling all the assumptions, you should assume they are wrong.

Here is that presentation:

F. Vasquez EconoMe 2026 Final Slides.pdf

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