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Plan Well, Retire Well

Saving and investing your money

Uncertainty Challenges Financial Planning


The other evening I was juggling dollars and cash flow, and trying to do some financial planning for myself. I realized that I was stumbling because I just didn't know how to predict life. For example, how long will I and my husband live? Just how much are college costs going to add up? I had more questions than answers!

I considered giving up on financial planning and then decided that really wasn't a good idea! Even though we may not be able to eliminate all uncertainty in life, we can make financial plans using as much good information as we can gather.

Let's talk about planning for retirement. Many people underestimate how long they are likely to live, and don't save enough money. How long do you think you're likely to live? You can estimate this using one of many longevity calculators on the internet. The Longevity Game, helps you see how different variables can affect the prediction of how long you'll live. While it's true that longevity calculators are not crystal balls, using one may remind you that you need to plan for quite a few years (perhaps decades) in retirement.

Do you know how much money you're likely to receive from Social Security in retirement? How does opting to receive Social Security payments early before you've reached full retirement age effect how much you'll receive monthly? If you don't know, try out the calculators at the Social Security website. Gathering this type of information can help you decide how much you need to save for retirement now.

Sometimes all that is required is a pen, paper and a little time to estimate costs. Most college websites provide estimated cost of living plus tuition for a year. I can multiply that times 4.5 years (than I'll be happily surprised if graduation is within 4 years), and figure in an increase of costs of about 6%. (According to the College Board, the ten-year historical rate of tuition increase is approximately 6 percent.) I might be figuring a little high with these numbers but I personally prefer to plan that way.

Perhaps you're at a different life stage and you're trying to decide how to pay off student loans, save for a home, and plan a vacation. The Consumer Federation Protection Bureau's new Student Debt Repayment Assistant, can help explore the most effective way for you to pay off your student loans while managing other life needs and goals. You may find the Income-Based Repayment Calculator to be helpful to you.

I can't remove all the uncertainty in my life, and I probably don't want to. But I can search out information to help answer my financial planning questions. At times calculators on a website can be helpful. Sometimes meeting with human resource staff at my workplace can help me answer retirement planning questions. And other times, I may just need to make a list of expenses versus income and double-check that I'm saving for future goals as well as paying for current expenses. Even in uncertain times, we can create informed financial plans that help us decide how to spend our dollars today.



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