happy retirement

Oops! A Surprising Factor Retirees Forget to Plan for

Your retirement plan probably has a gaping hole in it, one you may fail to spot even though it’s an obvious fact of life that impacts everyone. This issue can cause big problems, but luckily, it’s also fixable.

You’ve saved, budgeted, worked with a financial adviser, managed your taxes, optimized your Social Security benefits, and checked off all the other major planning boxes. It might feel like the only thing left to do in your retirement planning is to actually retire. But there’s one thing you probably forgot to account for in all your plans — and it’s something that has nothing to do with your finances at all.

That crucial variable that you might forget to plug into all your retirement planning calculations and projections is not overly complicated, but missing it cause all that careful planning you’ve done for decades to go out the window. What is this mysterious X factor? It’s change. Specifically, it’s the fact that you change.

As Harvard psychologist Dan Gilbert puts it, “Human beings are works in progress that mistakenly think they’re finished.” He goes further, saying, “The person you are right now is as transient, as fleeting and as temporary as all the people you’ve ever been. The one constant in our lives is change.”

Gilbert explains that we fail, over and over again, to understand how much we change thanks to the “end of history” illusion. This is the false belief that we consistently have throughout life that the person we are in the present moment is the person we were meant to be; we’re finally done growing and learning and changing and we’ve arrived at who we truly are.

This is part of what makes this factor so difficult to account for when doing something like retirement planning; most people will believe that it’s true for other people, but not for them! You would do well, however, to realize that the person you are when you eventually get a retirement party will not be the exact same person who made that party possible throughout your working and saving years.

How Different Are You Now from the Person You Were 10 Years Ago?

Retirement planning is difficult because we might start saving in our 20s or 30s and seriously strategizing in our 40s and 50s — all for something that will happen in 10 or (many) more years into the future.

It’s hard enough to predict with any degree of accuracy what your career, your finances and your life will look like next year, let alone in another five. In fact, go ahead and think back to where you were five years ago. Would that person be shocked at what life looks like now?

Of course, the global pandemic that turned 2020 upside down was a curveball no one could have expected. But setting aside the current events we’re all dealing with, think about not just how life might look different today but how you may have changed.

What’s different about your interests or your hobbies? Has your devotion to them grown, or has your attention moved on to other pursuits? What about your goals: As you’ve achieved what once seemed impossible, how has your thinking about “what’s next” evolved? Even aspects of your personality can shift with time.

Change doesn’t need to be radical or dramatic; it can be slow and gradual. But it’s still a departure from what once was — and it’s something that you probably would not have predicted five or 10 years ago. (In fact, Gilbert explains that people of every age, from 18 to nearly 70, underestimate how much they’ll change in the future.) Change isn’t a bad thing, either. As you learn, grow, develop and experience more, change naturally flows as part of those processes.

The bottom line is that we can reasonably expect to change over time. The person we are right now in this moment is probably not going to be the same as the person we’ll be in 10, 20 or 30 years from now. And that’s OK ... but how do we handle something like financial or retirement planning if that’s true? How do we start planning a retirement for a person we don’t yet know: our future selves?

4 Keys to Plan a Good Retirement for Your Future Self

Retirement planning would be easier if there were some strategy you could use to determine what kind of person Future You is likely to be. Unfortunately, there are no Buzzfeed-type quizzes that you can take to find out your Retirement Personality (at least, not yet). There is no practical way to reliably predict what your life will look like decades from now, or what you will be like.

What we can do, however, is create a financial and retirement plan that allows for freedom and flexibility. That plan should also strike a balance between life today and life far into the future. The goal should be to design a financial strategy that gives you the means to pursue what you want both today and tomorrow.

How can you accomplish this? Start by following these fundamental guidelines:

No. 1: Strike a balance between today and tomorrow: In practical terms, this means finding the right savings rate that gives you a high probability of having enough money in the future without taking away opportunities and experiences that are important to you today. I generally recommend that my clients put 20% of their gross income toward long-term investments (like retirement accounts or a portfolio in a brokerage account they can leave invested for at least 10 years). I’ve found this guideline gives people a great chance of being able to fund future lifestyles, but still provides money left over to enjoy right now.

No. 2: Don’t assume everything will work out perfectly: Avoid developing a plan that requires everything to go exactly right in order to work. We can, and should, expect the unexpected, which is why we develop cash reserves, we make Plan B’s, and we prioritize goals in order so that we clearly understand what’s on the chopping block if we can’t do everything we want.

No. 3: Give “Future You” options: It’s a big red flag if your plan only works if you work until you’re over 70, or stay in the same house in the same town for the rest of your life — and you’re making that decision in your 30s or 40s. Making massive financial decisions or commitments that you have no choice but to keep for decades to come (in order to make room in your financial life for something you want now) feels a bit like robbing Peter to pay Paul. From your vantage point of today, it might seem like no big deal, but remember: Things change. Your financial plan should provide you with enough wiggle room to chart a new course if you realize you’re tracking the wrong way.

No. 4: Plan conservatively for the future: Overestimate your expenses, and underestimate how much money you’ll have coming in from various income streams. Run projections assuming you won’t receive Social Security income (or at least, a lower benefit than what retirees get today). If you end up with higher cash inflows and lower outflows, then you have a surplus that provides more freedom and flexibility to use your money for many purposes — whatever they may be in the future.

About the Author

Eric Roberge, Certified Financial Planner (CFP) and Investment Adviser

Founder, Beyond Your Hammock

Eric Roberge, CFP, is the founder of Beyond Your Hammock, a virtual financial planning firm that helps professionals in their 30s and 40s make mindful decisions with their money and strategically use their incomes to achieve financial freedom. Eric is one of Investopedia's Top 100 most influential financial advisers and is a member of "Investment News' " exclusive 40 Under 40 class of 2016.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
11 Best Monthly Dividend Stocks and Funds to Buy
Kiplinger's Investing Outlook

11 Best Monthly Dividend Stocks and Funds to Buy

Your bills come monthly. Why not your dividend checks? These are some of 2021's best monthly dividend stocks and funds for easier income planning.
May 25, 2021
4 Strategies to Reduce Taxes in Retirement
retirement planning

4 Strategies to Reduce Taxes in Retirement

Don’t let the possibility of higher taxes in the future sink your retirement income plan. Consider these four ways to help manage your taxes, keeping …
May 31, 2021


3 Essentials for a Successful Retirement
retirement planning

3 Essentials for a Successful Retirement

To plan for the next phase of your life, you need clear strategies to provide for these three retirement needs.
June 13, 2021
As You Plan for Retirement, Also Prepare for the Unexpected
estate planning

As You Plan for Retirement, Also Prepare for the Unexpected

Whether you’re close to retirement or decades away, no one’s immortal. Things happen. Are you ready, or could you leave the people you love in a lurch…
June 12, 2021
New Graduates’ Guide to Paying Off Student Loans
student loans

New Graduates’ Guide to Paying Off Student Loans

Congratulations on finishing your degree! Now it’s time to study up on the best way to pay off your student debt. You have a lot of options, so choose…
June 12, 2021
Should My Money Stay or Go? Employer 401(k) vs. IRA Rollover

Should My Money Stay or Go? Employer 401(k) vs. IRA Rollover

Employers are the newest contenders for the rollover assets from your retirement plan. Here’s what to consider when leaving your job and choosing whet…
June 11, 2021