Episode 21 - How to Avoid the Fat Tail Risks In Retirement

So many retirement planning presentations are premised by using previous U.S. market performance and extrapolating that into the future.  Even Monte Carlo analysis is guilty of this.  Yes, the Monte Carlo has a random sequence of events. Meaning, 2008 could be followed by 1974 etc, and that potentially could be devastating to that unlucky person who retired into those back-to-back years. But, that's just one scenario out of 10,000 using return numbers that were simply phenomenal in the history of the world.    In fact, the world has never seen investments returns like that of the US over the last 100 years...ever.   So, to use that for future analysis seems to be quite a bit of cherry picking.  Doesn't mean it won't happen but let's think about this.   How much different would your retirement projections look if we used an average investment return scenario over the last 100 years as opposed to the US? What would you do differently? This is why I harp on paying down debt.