Green Retirement Blog

The current approach to retirement planning is neither, financially accurate, nor environmentally sustainable. It will lead to disastrous consequences, not only for our planet, but possibly your retirement as well. The retirement industry calculates your retirement on the assumption that you wish to remain hyper consumers - a “Consumption Assumption.”

The method the retirement planning industry uses to calculate the amount of savings you will need for retirement, is to assume you will consume between 70% to 80% of your current earnings, annually in retirement. This method is the accepted conventional wisdom of the retirement planning industry – and it’s wrong. First, it’s calculating retirement using an assumption, a guess, and secondly, earnings have almost nothing to do with a person’s ability to retire.

The retirement industry is calculating your retirement, by guessing how much you will spend in retirement, depending on how much you make today.

There are several mistakes, the retirement industry makes in planning retirements, but this is the biggest error of them all. A whole industry is built on this faulty mathematical calculation. And it will have disastrous consequences on the environment and your retirement.

Consumption Assumption and the Environment

The United States of America has 5% of the world’s population – yet we consume 25% of the world’s resources. Why is that? Waste. Our consumer lifestyle, and consumption based economy, is destroying the planet. It is leading to global warming, species extinction, wars for oil and other natural resources. And our lifestyle, and economic model, is being adopted by China and India.

The world can not sustain this amount of consumption. Oil is at a $100 a barrel, the North Pole is melting, and the Amazon Rain Forest is disappearing. If we continue at this pace, scientists warn, there will be virtually nothing left within a century. We are the problem, but that also means, we are the solution. What we need, in order to save the planet, is the opposite of consumption - and that is conservation.The way retirement works today, is for you to acquire a tremendous amount of wealth, in order to sustain a lifestyle that is unsustainable. It is retirement based on consumption. And it doesn’t work.

Consumption Assumption and your Retirement

One of the things being wasted by our consumption lifestyle and economy, besides the environment, is people’s retirement. People are literally consuming their retirement. If people switch to conservation, before and during retirement, they could save hundreds of thousands of dollars, retire years earlier, and help the environment.

Even if you don’t care about the environment, the consumption assumption method of planning retirements, is a mathematically faulty equation for calculating retirement. It’s a guess based on a meaningless number. It leads to worthless retirement plans, forces people to save more money than is needed for their retirement, and retire much later than is necessary.

The 70% to 80% of current earnings figure the retirement industry uses is a guess. A 2004 report on, “The Retirement Prospects of the Baby Boomers”, done by the non-partisan Congressional Budget Office (link here) proves the point.

The Congressional Budget Office (CBO) recently reviewed the research that has been conducted over the past decade on the retirement prospects of aging Americans.⁽²⁾ That review reveals a mixed picture of boomers’ futures. Because retirement preparations are largely a matter of personal choice, there is no widely accepted standard of what constitutes an adequate or appropriate level of retirement income or consumption. In the absence of a single standard, researchers have used a number of different measures to assess the adequacy of retirement preparations; and the application of a variety of measures produces a variety of conclusions.

 

Earnings, your salary, the second part of the retirement industry equation for calculating retirements, is equally worthless. Why? Because your retirement is not dependent on how much you earn today - or tomorrow. Your retirement is a function of how much you have in savings and how much you spend in retirement. Your salary is not even in the equation. Yet, the retirement industry uses your salary, to calculate how much you will need for retirement.

The Consumption Assumption, is the backbone of the retirement industry, an article of faith that is widely accepted by most everyone. I hope that I have adequately explained, how it is not only mathematically incorrect, but also damaging to the environment and your retirement. Their is another method for calculating retirement, one that is based on sound mathematics, and that helps save the environment - the iPlan Retirement method.

To learn more, visit the Retirement Website