Thoughts on Retirement Planning

How much money do we need for retirement?

Most of us do not know, so being internet savvy, we surf the internet for online financial calculator. Key in some figures and the marvellous calculator will give a very nice figure, such as $500,000 for retirement. It also shows at the rate of return of 5%, 6%, 10% or whatever other percentage, we need to save a few hundreds monthly.

So many of us don't trust the online calculator, so we seek the assistance of a professional financial planner. After answering some questions about the money we make every month, our expenses, indulgences and whatever desires we have (which involves money), the clever professional financial planner comes out with an even bigger figure than $500,000.

All these calculations are very impressive, and we tend to treat the figure as the holy truth. So we work hard to reach the magic sum required for retirement.

But stop a minute and think.

Do we know when we are leaving this earth permanently? Do we know what kind of health problems we will develop when we are old? And what will be medical costs by the time we retire?

If we do not know, how can the professional financial planner know? Do we really think the clever calculator can calculate our lifespan accurately?

Without knowing when we are leaving this earth, without knowing the health conditions we will face in the future, without knowing how much the medical costs will be, all the numbers are just an estimate. An estimate that will never be correct.

The professional financial planner estimates that we will live up till 80 years old. He or she is just taking the average lifespan. We may live till 120 years old, by then it's too late to scold the stupid financial planner.

So in the matter of financial planner, it is better to prepare for the worst, and hope for the best. Better prepare for living beyond 100 years old and triple the medical costs estimate.

Hopefully my money will last a day longer than I do!