Broker Check

What Spreadsheets Don't Tell Us

October 21, 2020

Retirement projections tell us a lot. They can show us what a client's retirement picture may look like in 10, 20, or 30 years, which leads to more informed decision-making. This includes determining what age retirement becomes possible and how much can be spent during retirement years. That's powerful information.




But it's also spreadsheet information. It should be used as a factor in the decision-making process, not an all-or-nothing metric.

Good retirement planning uses quantitative and qualitative inputs.

Quantitative inputs, such as a client's assets and liabilities, annual income and expenses, and investment return/assumptions, are vital for producing retirement projections.

When making big financial decisions, you need to consider qualitative factors too - Your values, emotions, personality, and risk tolerance. Remember there's a reason why it's called personal finance - it's as much personal as it is finance.

A few examples. The spreadsheet may tell us that...

  • You can retire at 62 and still meet your financial goals.
    • But you might decide to work longer because you want the additional margin of safety. Or you really like your job (yes, this does exist) and value the purpose and fulfilment it brings you.
  • The cash you're keeping at the bank is earning close to zero.
    • But maybe having that peace of mind and security will keep you from selling out of your investment portfolio when market volatility hits.
  • A larger mortgage on your new home makes more sense with interest rates at historic lows.
    • Although having less debt with a smaller mortgage may help you sleep better at night.
  • Your portfolio should be heavily overweight stocks instead of bonds, given historical returns.
    • But that may not jive with your risk tolerance and investment time horizon.
  • You should make your next investment contribution all at once instead of dollar cost averaging into the market.
    • Breaking your lump-sum into smaller dollar amounts and investing over six months or a year may help remove the guesswork and get you invested.

Guess what? This is okay! Making a decision that works for you, but that goes against the optimal spreadsheet answer, is often the right answer. Keep this in mind when making your next big financial decision.





Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.