Say you’ve worked out that you need £1,000,000 to last the rest of your life. That’s the figure you’ve arrived at.
You’ve done your homework properly. You’ve considered many different scenarios. You’ve factored in fluctuations and changes that may occur. And after all that, you’ve decided that’s how much you need before you can stop working and start drawing down.
When the day comes that your bank account hits that number, how confident are you that you’ve got it right? How sure are you that you will have enough to last you the rest of your days? Despite planning for interest rate variations, what if something really catastrophic happens? Even though you built in a buffer for the future cost of things, what if you got your predictions wrong? Despite factoring in the possibility that you could live 10 years more than is probable, what if you lived way longer than you expect? What if all these happened! OMG!
Even though we know that the chances of these things happening are low, and knowing that we have planned for one, or even more, to be able to be managed within the figure, the fear of the completely improbable happening would keep most people from taking the plunge.
We are heavily biased towards negative outcomes. Most of us would rather waste years more of our lives working to amass more, rather than face even the remote possibility that we could run out of money.
We all vastly overestimate the possibility of highly remote but negative outcomes. We vastly underestimate the possibility that things will work out as we have planned. And we discount almost entirely that we might just get ‘lucky’ and that things may pan out way better than we hoped they would!
Despite the careful planning, despite the meticulous calculations and despite the deliberate attempts to cover the downsides we still have an uphill struggle pushing the rock of negativity, doubt and fear.