Retirement planning isn’t about perfectly predicting the future. It’s about understanding how your plan may respond when things turn out differently than expected.
One thing I’ve learned after working with families throughout the Greater Milwaukee area for many years is that retirement rarely goes exactly according to plan.
Sometimes that’s a good thing.
Maybe the markets perform better than expected. Maybe you spend less than you thought you would. Maybe you decide to work another year because you’re enjoying what you do—or you simply discover that you’re in a better financial position than you expected.
But sometimes things can go the other direction.
Markets decline. Inflation runs higher than expected. Healthcare costs increase. A spouse passes away earlier than anticipated.
Or maybe you simply live a lot longer than you ever expected—which is hopefully a good problem to have (although I’ve had a few clients tell me otherwise).
That’s why I don’t believe a good retirement plan should simply answer: “Does my retirement plan work?”
I think it should also ask: “What happens if things don’t go according to plan?”
Retirement Planning Isn’t About Predicting the Future
I wish I could tell clients from Mukwonago to Hartland exactly what the stock market will do over the next 20 or 30 years, what inflation will be, how long they’ll live, what healthcare will cost, or exactly how much they’ll spend throughout retirement.
Obviously, I can’t. And neither can anyone else.
Sometimes the best thing we can do is plan around what we know—and hope for the best with what we don’t know.
When we’re building a retirement plan, we have to make certain assumptions. We may estimate inflation, spending, Social Security income, future long-term care events, and how long someone may live.
But those are still assumptions.
And the further we look into the future, the greater the possibility that something turns out differently than we expected.
So instead of pretending we know exactly what’s going to happen, I think it’s much more useful to ask some good “What-IF?” questions.
- What if the stock market experiences a significant decline during the first few years of your retirement?
- What if inflation stays higher for longer than expected?
- What if you—or your spouse—lives well into your 90s?
- What if you—or your spouse—eventually need some form of long-term care?
- What if your spending is higher during the first several years of retirement because you’re traveling more and doing many of the things you’ve been waiting years to enjoy?
And here’s another one most people probably haven’t considered:
- What if Social Security doesn’t provide exactly what you’re expecting?
The 2026 Social Security Trustees Report projects that, without legislative changes, the reserves of the Old-Age and Survivors Insurance Trust Fund could become depleted in 2032, after which continuing income would be sufficient to pay approximately 78% of scheduled OASI benefits.
Does that mean I’m predicting everyone’s Social Security benefit is going to be cut? No.
But should our plan account for the possibility of a reduction? Maybe.
Congress could make changes between now and then, and none of us knows exactly what those changes may ultimately look like. But from a planning standpoint, that’s not really the point.
The better question might be:
“What would happen to my retirement plan if Social Security eventually provided less than I’m currently expecting?”
That’s something we can actually evaluate.
Where Stress-Testing Comes In
You’ve probably heard the term “stress test” before. Banks stress-test their financial positions. Engineers stress-test structures. Doctors stress-test the heart.
The concept is pretty simple:
Don’t just look at how something performs under normal conditions. See what happens when you put it under some pressure.
We can do something similar with a retirement plan. Instead of creating one projection and assuming everything happens exactly as expected, we can test the plan and see how its probability of success changes.
If the results change considerably under specific scenarios, it doesn’t necessarily mean you have a bad plan. It may simply reveal an area we need to pay closer attention to. And it’s better to see that during the retirement planning process, when we still have time to make informed decisions, rather than discovering it as a surprise down the road when there may not be as much room to make adjustments.
Why I Believe Probability-Based Planning Can Be So Valuable
This is also one of the reasons I believe probability-based planning can be so valuable.
Rather than relying on one static set of assumptions—as if market performance, inflation, spending, and everything else are going to unfold exactly the way we projected—we can evaluate a retirement plan across many different potential outcomes. That’s much closer to real life.
Markets don’t return the same amount every year. Inflation changes. Spending changes. Life changes.
The value isn’t in trying to predict which exact scenario is going to happen.
It’s in understanding whether your retirement plan may have enough flexibility to withstand a range of different outcomes.
And here’s something else I think is important:
Stress testing isn’t always about discovering bad news.
Maybe the plan shows that you have more flexibility than you thought. Maybe you could retire a little earlier. Or here’s a hard one to grasp for many of my clients: Maybe you could spend a little more in retirement. It could be that trip you’ve been putting off, helping your children or grandchildren, or leaving more behind to your family or causes dear to you.
A good retirement plan shouldn’t only tell you when you may need to be more cautious.
Sometimes it should also help you recognize when you may have more flexibility than you realized.
So What’s the Better Question?
We can’t know exactly what the next 20 or 30 years will bring.
And I don’t think a retirement plan should pretend that we can.
So instead of simply asking:
“Does my retirement plan work?”
Perhaps the better question is: “What happens to my retirement plan if things don’t go according to plan?”
Because the goal isn’t to perfectly predict your future.
It’s to have a plan that’s better prepared for the things we know could happen—even when we don’t know which ones actually will.
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