A few days ago, I introduced The Assumer. Behind the curtain in every traditional financial plan there has to be someone making a long list of assumptions. These are nothing more than guesses about things like inflation, your date of death, and returns on international small cap stocks.

Unknowable things.

One of the interesting things about the assumer is that he or she can make 30 year projections change dramatically with a very small change in any one of the assumptions.

This can lead to evil plans.

If the assumer wants to make to plan look like you need to save more, pretty simple, raise the inflation rate, drop a return, or lengthen someone’s life just a bit. It doesn’t take much when you are guess-casting over 20-30 years.

Sometimes this is used as a selling tool, but often these are not evil plans at all. It is just that when you are dealing with this many variables over such a long time, small changes can have a massive impact. And remember that no one has proven to be a very good assumer.

It might be better to forget all the guessing and just focus on some of the things that we can control. How’s this for a financial plan:

[1] Save as much as you reasonably can

[2] Don’t lose money

[3] Avoid costly mistakes

[4] Plan on a 4-6% withdrawal rate

Now I realize that is easier said than done, but that is what a really good advisor does. Rather then produce some worthless book of assumptions, you should work with someone to nail the ongoing, lifetime process of making smart decisions about money.