The Things Retirement Calculators Leave Out

The uncertainties don’t end there — when we look away from the spreadsheet, at the real world, we realise they are barely beginning. Three big risks simply don’t figure in the tidy world of the calculator: one, that I lose my job and can’t find anything comparable; two, that my wife and I divorce, an expensive business; three, that anything from depression to a slipped disc to cancer renders me too ill to work. Ill health, unemployment and divorce are common and bad for your net worth. (They are also bad for measures of “subjective wellbeing”; more colloquially, they make you sad.)

Then there are the wilder possibilities — I might be defrauded by con artists; I could be sued for libel; my home, which is near a flood plain, may be rendered uninhabitable and unsellable by the weather.

I’m not planning on being sideswiped by any of these misfortunes but, then, who is? A common cause of a penurious old age is not a savings problem as such, but an insurance problem: people who are on track to save enough for a comfortable retirement but are then derailed by “events, dear boy, events”.

In the Financial Times, “undercover economist” Tim Hartford talks about the unforeseen costs that retirement calculators seem to leave out.

Bonus: Hartford was recently on an episode of Planet Money applying economic theories to listeners’ dating problems. His response to the person practicing polyamory was interesting!

Photo: David Goehring

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