To make retirement simple, let’s imagine I hang a diesel truck tire by a rope 5 feet in front of you at eye level. The tire is very large and so is the hole in the center.
I take a baseball and place it in your hand, asking you to toss it through the tire 100 times… how many times do you think you could make it through…80…95…100? Most people say 100, and unless you have terrible aim, you’d probably get 100/100 as well.
Now imagine I replaced the diesel truck tire with a Toyota Corolla tire, the tire is smaller and so is the hole in the center, on top of that I move the tire 50 yards out – that’s half a football field!
With that same baseball, you get to try another 100 tosses… how many do you think you’d make this time? Answers vary, but the average guess is 15-20 times… It’s low right?
The Tire’s Distance and Size are Equal to Your Retirement Duration and Retirement Savings
Well, the distance from you to the tire is equivalent to how many years you’ll spend in retirement. The further the tire, the harder it is to make the ball through, thus the more difficult it is to make it through retirement.
The opposite is also true. The closer the tire, the easier it is to toss the ball through, thus the easier it is to make it through retirement.
The size of the hole represents the size of your assets. The larger the hole, the easier it is to make the ball through, thus the easier it is to make it through retirement. The smaller the hole, the more difficult it becomes to make the ball through, thus the more difficult it is to make it through retirement.
The highest probability of a successful retirement is having a lot of assets and a short retirement (dying early, or retiring late). The lowest probability of a successful outcome is having very little to no assets and a long retirement (living long, or retiring early).
Covering Needs with Lifetime Income Is the Single Most Important Aspect of a Retirement Plan
Your pension, social security, and retirement savings account are equal to the size and distance of your tire. Regardless of the size and distance of your tire, you need a plan – a retirement roadmap.
A retirement roadmap provides security by segregating needs from wants, and creates guaranteed lifetime income from retirement savings to pay the cost of needs for life; this is the foundation your plan. An emergency and growth layer are placed on top, to provide for unexpected circumstances, inflation, security, and legacy.