No assumptions. That’s one of my mottos in life because making
assumptions can get you into trouble when your assumptions turn out to be
wrong. And when it comes to retirement, many of you are making assumptions
that you are not even aware are probably not right. That’s what we’re gonna
spend our time talking about in today’s show.
Welcome to the Providence Financial Retirement Show. I’m your host, Anthony
sro. We are your retirement income source, and this is the place where retirees
come for income. Thank you for taking time outta your data. Join us wherever
you might be. Really glad that you’re here.
We’re gonna talk about why making the wrong assumptions about things in
retirement that many of you’re already making assumptions about why that can
be devastating to your retirement. And of course, as always, we’re gonna answer
your listener questions along the way as well. Thank you for joining us.
Why Assumptions Quietly Undermine Retirement Plans
You may know that I’ve been a retirement advisor for well over a quarter of a
century. And one of the biggest mistakes that people make in retirement
planning isn’t picking the wrong investment or choosing the wrong account.
It’s something much quieter than that. It’s building an entire retirement plan on
assumptions that actually feel reasonable, but don’t actually play out the way
you might expect.
Most retirees don’t sit down and say, I’m going to guess my way through
retirement. That’s usually not how retirement planning goes, but that’s
effectively what happens when a plan is built on things that we assume to be
true later on.
The problem is retirement is one of the few times in life where being just a little
bit wrong can have very permanent consequences.
Why “Average” Planning Fails in Real Life
Think about how most plans are created. They’re usually based on averages,
average market returns. Average life expectancy, averages surrounding spending
patterns, average inflation discussions.
And as long as life behaves in an average way, then that plan looks great on
paper. But real life is never average.
And what I see over and over again is that retirement plans don’t fail because
the math was bad. They fail because the assumptions behind the math were never
tested. And when one assumption breaks, it usually puts pressure on everything
else.
It’s almost like pushing over that first domino that causes the rest of the
dominoes to fail.
The Three Core Assumptions This Show Addresses
Today’s show is about the three most common assumptions that retirees make.
Assumptions that sound logical, assumptions that get reinforced by friends and
coworkers, and even financial headlines, but assumptions that rarely turn out the
way people think once retirement actually begins.
These aren’t fringe ideas. These are beliefs I hear every week from smart,
thoughtful people who have done a lot of things right financially.
The first assumption is about spending, specifically the belief that retirement
automatically means spending less.
The second assumption is about the market. This is the idea that if you just give
it enough time, everything averages out and works itself out the same way that it
did while you were working.
And the third assumption we’re gonna talk about is about social security. This is
the belief that it’s gonna cover more of retirement income than it realistically
does, especially after factoring in taxes and Medicare and real world expenses.
Why These Assumptions Create Stress
Individually, each of these assumptions might feel harmless, but when you stack
them together, they can quietly create a retirement plan that looks stable.
But is far more fragile than you might realize, and this is why so many retirees
are surprised not by a single dramatic event, but by a slow buildup of stress.
The plan technically works. It looks good on paper, but it doesn’t feel good.
Withdrawals feel uncomfortable. Market swings feel threatening. And decisions
that should feel confident start to feel reactive.
And the goal of this show isn’t to scare you or tell you that retirement planning
is impossible. It’s the exact opposite.
The Goal: Confidence, Clarity, and Realism
My goal is to help you have the peace of mind and confidence and clarity that
you deserve in retirement. It’s to help you recognize which assumptions deserve
a second look before they have a chance to cause problems later.
Because a strong retirement plan isn’t built on optimism, it’s built on realism.
It’s built on flexibility and preparation for outcomes that don’t show up neatly
on your spreadsheet.
And I know from experience that when it comes to retirement, there are some
risks out there that you need to be very, very aware of, but that you might not be
familiar with because you assume that they are not risks.
Introduction to Retirement Risks Resource
We’ve put together an animated video that talks about the seven most common
retirement risks that I’ve seen retirees make and how to avoid them.
You might be surprised what they are because you might have subconsciously
been assuming that they’re not even risks at all.
If you wanna find out what these common risks are, I’ll email this animated
video to you absolutely free of charge. You just have to ask for it.
You can do that by going to providence financial radio.com/video.
Once again, it’s providence financial radio.com/video. Leave us your
information and we will email this video to you shortly.
Transition to Assumption #1: Spending Less in Retirement
I’m Anthony s Carro. Thank you for taking time outta your day to join us for the
Providence Financial Retirement Show. We’re talking about the danger of
assumptions in retirement. I’m really glad that you’re here.
Thank you for joining us.
The first of the three assumptions that I brought up earlier that I wanna start
talking about now is assumption number one.
I’ll spend less in retirement.
Why the Spending Assumption Feels Logical
That’s one of the most common beliefs that people carry into retirement is that
idea that expenses naturally go down once work ends.
The logic behind it usually feels pretty straightforward. The mortgage is paid
off or close to it, and then the kids are on their own. There’s no daily commute.
There’s no work wardrobe, and fewer obligations generally tied to a job.
And when you look at all those line items, it’s easy to conclude that retirement
should cost less than when you were working.
But that belief really isn’t about numbers, it’s about replacement.
Listener Question: Trevor in Westlake Village
What is retirement actually replacing?
And there’s a listener question that came in that really ties in well to this and
came from Trevor in Westlake Village and he wrote in this:
Between paying off the house and not working anymore, our monthly expenses
should drop quite a bit once we retire. When you’re building a retirement plan,
how much income do people really need once those expenses are behind them?
And it’s a great question, Trevor, and it really captures this assumption
perfectly.
Why Spending Often Increases Instead
What it reveals is the idea that lower fixed expenses automatically translate into
lower overall spending, and in real life, that’s where plans often start to drift
away from reality.
While some expenses do go away in retirement, others tend to replace them.
And in many cases, they show up quickly and they stay longer than people
expect.
Travel is certainly a big one, especially in the early years of retirement. This is
often the first time that people truly have the freedom to do the things that they
postpone for years.
They often want to take more trips, they want to eat more meals out and just
have more experiences in general. And those expenses are gonna add up in cost.
Other Commonly Overlooked Costs
Healthcare’s another area that rarely gets smaller. Even with Medicare, retirees
still face premiums and supplemental coverage and prescriptions and out-of-
pocket costs that tend to increase over time.
And then there are other spending considerations that people often don’t usually
model. Things like helping adult children or supporting aging parents.
Home repairs and upgrades are things that you need to consider, especially now
that you’re gonna be home more often.
And hobbies, that’s another area to consider.
The Reality of Retirement Spending Phases
Hobbies that used to be occasional become part of weekly life when you’re
retired and those things add money.
And what I consistently see over time is that retirement spending often rises
during the early go-go years.
It often levels out later when you’re in your slow-go years, when you tend to
slow down.
The spending only starts to decline much later in life, what I often refer to as
the no-go years.
The Real Risk of Planning to Spend Less
The real risk here is not spending more. The real risk is planning on spending
less and then being forced to adjust when reality doesn’t actually work out that
way.
And when that happens, retirees often respond in ways that they didn’t expect.
They take larger withdrawals from investments during market downturns. They
become more sensitive to volatility, or they might even start pulling back on
experiences and travel and things that they were looking forward to just
because their plan didn’t leave enough room for error in real life.
It’s very rare that I see someone’s expenses actually go down when they retire.
Closing This Section: Income Can Still Work
The fixed expenses might go down, but the variable expenses of all the fun
things you wanna do actually go up. And overall, most people spend more in
retirement than they ever were when they were working.
That’s usually what happens.
And thank you, Trevor, for taking the time to write in that question, and I
certainly hope I’ve given you something to think about.
Here’s the good news though. If you’ve saved up in your retirement accounts
throughout your working years, then when you do retire, you can actually start
getting income from those accounts.
But you have to be invested appropriately to do that.
Welcome Back & Recap of Assumptions
I’m Anthony sro. Thank you for staying with us here for the Providence
Financial Retirement Show. We’re talking about the danger of assumptions in
retirement. We’ve already talked about the danger of assuming that you’re
gonna spend less in retirement, and that’s gonna take us to assumption number
two, and this is that the market will just average out over time.
This is the second major assumption that retirees often rely on
because it sounds familiar. It sounds comforting, and mathematically it’s
correct, at least on the surface. It’s the belief that if you give the market enough
time, everything’s going to average out. Most people were taught this lesson
during their working years.
You invest consistently and you ignore short-term noise and over the long
periods of time, market trends are gonna reward your patience. For someone
who is still earning a paycheck, that approach often works out remarkably well.
How Retirement Changes the Market Dynamic
The problem though is that retirement changes the dynamic completely between
you and the market during your working years.
Market downturns are inconvenient, but they’re usually not dangerous. You’re
still contributing, you’re still earning. You have time to recover, and in some
cases, downturns are even beneficial because you are actually buying and dollar
cost averaging at a lower price. Retirement though flips that dynamic
completely.
Once you retire, you’re no longer adding money to the market. You’re taking
money out, and that single shift changes how risk works, even if the
investments themselves don’t change at all.
And this is where the idea of the market will average out starts to break down.
Averages don’t arrive on schedule. They don’t show up evenly, and they don’t
care when withdrawals are happening.
Sequence of Returns and Timing Risk
Two retirees can experience the same long-term average return and
end up in very different places, depending on one simple thing: when those
returns occur.
A strong early market combined with withdrawals feels very different than a
weak early market with the same withdrawals, even if the average return over
time ends up being the same.
This is what’s often referred to as sequence of returns risk, but the label isn’t
what matters. What matters is the reality that timing matters more once income
is being taken from a portfolio.
The danger of this assumption is very subtle though. Plans still look fine on
paper and the math works, assuming that the market cooperates early on.
But when early returns are negative or volatile, retirees may be forced to sell
assets at the worst possible time just to generate the income they need to
support their lifestyle.
Why Market Dependence Creates Stress
And once those assets are gone, they’re gone. There’s no paycheck coming in to
rebuild them. This is exactly why relying on market averages in retirement is
really very different than relying on market averages during the accumulation
phase of life.
The same strategy can produce very different outcomes depending on where
you are in life.
When people hear this, they sometimes think that the solution is simply to take
less risk or become more conservative, but this really misses the real issue.
A portfolio can look conservative and yet still be highly dependent on market
cooperation if income is coming from selling assets rather than producing cash
flow.
This is where retirement planning starts to separate itself from investment
management. The goal isn’t to predict the market correctly, it’s to reduce how
much the market needs to cooperate for your plan to work.
Listener Question: Caleb in Thousand Oaks
We received another listener question, and it comes from Caleb in Thousand
Oaks, and he wrote in this:
“I understand the markets go up and down, but if my investments earn a
reasonable long-term return, does it really matter when those ups and downs
happen? As long as I stay invested?”
Well, that’s a fantastic question and that’s why we’re gonna answer it right
here on the Providence Financial Retirement Show.
Why Withdrawals Change Everything
The challenge though is that once you retire, returns don’t happen in isolation
anymore. They’re happening at the same time that money is being withdrawn.
And that changes everything.
If markets perform well early in retirement, withdrawals feel easy. The
portfolio has time to grow and your income’s gonna feel sustainable.
But if markets struggle early on, especially in the first several years, those
same withdrawals do lasting damage, even if the market eventually recovers.
Losses early in retirement don’t just reduce the account values temporarily.
They reduce the number of shares or the number of dollars left in the portfolio
to participate in any future recovery.
That’s a permanent change. That’s not a temporary change.
Emotional Impact of Market-Based Income
When income depends on selling assets, retirees can be forced to sell during
downturns simply to meet your cashflow needs.
Once those assets are gone, there is no paycheck coming in to rebuild them.
This is also where emotions start to interfere with otherwise sound decisions.
When income depends on market performance, volatility doesn’t just show up
on a statement. It shows up in stress.
Retirees begin to watch the market more closely. They begin to question their
withdrawals, and they start to feel pressure to react rather than just staying
disciplined over time.
Why Structure Matters More Than Predictions
A resilient retirement plan, on the other hand, is built to absorb these surprises
without forcing bad timing decisions.
No good decisions are made when you are panicking.
When you know that it doesn’t matter what the market does, you’re still going
to get your income, then that panic moment starts to disappear.
So far, we’ve talked about two assumptions that quietly shape a lot of
retirement plans.
Assumption #3: Social Security Will Cover More Than It Does
Social Security is one of the most misunderstood parts of retirement planning,
not because it’s unimportant, but because people often expect it to do more
than it was ever designed to do.
For most retirees, Social Security was intended to be a foundation. It was
designed to be a base layer of income.
It was never meant to replace your full paycheck or solve for spending gaps
created elsewhere in your plan.
The Limits of Social Security
The amount of Social Security income that actually shows up to support your
day-to-day living is often less than what you might have expected.
Claiming decisions aren’t just about maximizing a check at a certain age.
They’re about coordinating benefits between spouses, understanding survivor
income, and recognizing that retirement often lasts much longer than many
people expect.
Social Security is also structurally inflexible. The income arrives consistently,
but it doesn’t adapt to real life.
Moving Away From Assumptions Toward Structure
One of the most effective ways to reduce stress in retirement is to shift your
focus away from assumptions and predictions and toward structure.
When retirees understand which dollars are stable and which are variable,
decisions feel lighter. Spending becomes clearer. Market volatility becomes
easier to tolerate.
This is where many retirees realize the issue was never that they did anything
wrong. Their plan just depended on too many assumptions lining up perfectly.
Final Listener Question and Closing Thoughts
Julian wrote in and said retirement feels more stressful than expected even
though the plan technically works.
That’s normal, but it’s also a signal.
Structure doesn’t eliminate risk, but it changes how risk is experienced.
When income is structured intentionally, spending becomes clearer, market
volatility becomes less emotional, and retirement starts to feel supportive
instead of fragile.
Final Summary
We’ve talked about three assumptions:
-
That spending naturally goes down
-
That markets will always average out
-
That Social Security will fill gaps it was never designed to fill
Stress testing a retirement plan isn’t about predicting the future. It’s about
building something that works even when things don’t go as expected.
Your retirement should feel flexible, intentional, and supportive.
My name is Anthony Charro. You’ve been listening to the Providence Financial
Retirement Show. Thank you for joining us. Have a great week everyone.
God bless.
Disclaimer: This transcript is provided for educational and informational purposes only and reflects a general discussion from a live radio broadcast. It is not intended as personalized financial, tax, or legal advice. Individual circumstances vary, and listeners should consult a qualified professional before making decisions.