The key point I wanted to make though, is how crucial consideration of inputs can be to a long-term plan, and how important it is to challenge them often.
It’s not that one shouldn’t make assumptions – predictive models rely on them to have any use at all – it’s more that it is important to retest the thought process that led to those assumptions, and then be prepared to change them.
The average retiree at 65 today will live for nearly 20 years. However 50 per cent of retirees will live for longer than that, with a small percentage living a lot longer – 40 years or so. And that’s just on today’s figures. Things change, and a good financial plan (whether for retirement, annual budgeting or something like a house purchase) should be able to be stressed and changed as well.
Ben Kumar is an investment manager at Seven Investment Management
