Close Enough

Dudley now had enough information to ask the question he had been avoiding. Would the money last? He knew they had about $1.2 million in retirement accounts. He knew the portfolio was roughly eighty percent stocks and twenty percent bonds. He knew where the money would come from once the paychecks stopped. He also had a reasonable idea what it cost to be them.

The house and cars were about thirty-five hundred dollars a month. Essentials, utilities and insurance were another two thousand. Another couple thousand went toward groceries, television, dining out and the normal expenses of being alive.

Then there were the bigger purchases. Home projects. Cars. Appliances. Things that broke. Things they wanted. Those did not happen every month. They required a separate conversation. Want or need? Needs usually won. Sometimes Wants won too. Dudley considered this one of the advantages of having money. Eight thousand dollars a month was not exact. It was close enough. It was life.

The credit cards were in decent shape. Dudley and Betty tried to pay them off every month, although occasionally paying them off every month required a few follow-up payments. Dudley considered this consistent with the spirit of the policy.

And now Dudley knew something more important. He knew what they wanted that money to buy.

Betty wanted time with the kids and their parents. She wanted lunches with friends, pool days, flowers and travel that lasted long enough to actually be somewhere. Dudley wanted those things too. They were not planning a dramatically more expensive life. They were planning a life with more time in it.

That gave Dudley enough to model the future. The investment company holding most of their retirement money had a retirement planning tool. Dudley had already spent enough time on the website to know where it was. He entered their savings, investment mix, spending, ages and the income they expected later.

Then the tool asked how long they expected to live. Dudley paused. This seemed like information the tool should have been providing him. He picked an age.

The tool ran something called a Monte Carlo simulation. Dudley associated Monte Carlo primarily with casinos, James Bond and people with significantly better cars. Apparently it was also how retirement worked.

The computer imagined thousands of possible futures. Markets went up and down. Inflation changed. Investment returns arrived in different orders. Dudley and Betty lived for varying lengths of time. Some of the futures were unsettling.

Then it produced a percentage.

Dudley stared at it.

He had asked a simple question.

Will the money last?

The computer had answered:

Probably.

Dudley did not care for probably. So he changed some assumptions. Ninety-three percent. He changed them again. Eighty-five percent. Then Dudley did what Dudley did when presented with encouraging information. He tried to break it.

He lowered returns. He increased spending. He made them live longer. He generally made the future less pleasant. Seventy-five percent. The percentages moved. The conclusion did not.

Under the assumptions Dudley thought were reasonable, it was highly probable that they could afford to stop working and live the life they had just described.

This should have made Dudley feel better. Mostly, it did. The part that bothered him was the missing twenty-five percent. Or fifteen. Or seven. Depending on how pessimistic he was being.

Dudley had spent most of his adult life believing that if he gathered enough information, asked enough questions and analyzed something carefully enough, eventually the answer would appear. Retirement did not seem interested in cooperating.

Nobody knew what the market would do next year, what inflation would be ten years from now or exactly how long either of them would live. The calculator could run the future ten thousand times and still could not tell Dudley which one they were actually going to get. That was irritating.

But there was something else the calculator could not know. Dudley and Betty were not going to sit still for thirty years while life happened to them. If markets were bad, they could spend less. If things were going well, they could travel more. If something changed, they could change the plan. If they wanted or needed to earn some money, they could figure that out too.

They had been adapting their entire lives. Jobs changed. Kids grew up. Parents got older. Houses needed things. Plans worked until they didn’t. They learned. They adjusted. They kept going.

Dudley looked at the screen again. The tool could not promise that their money would last. It could tell him that, based on what they knew today, it probably would. And not barely probably. Highly probably.

Dudley looked at Betty.

“I think we can do this.”

“You think?”

“I’ve run it a lot of different ways.”

“That wasn’t my question.”

Dudley looked back at the laptop.

“No. I don’t know for certain.”

Betty waited.

“But every reasonable version says pretty much the same thing.”

“What does it say?”

“That we’re highly likely to be fine.”

“How likely?”

“Depends how pessimistic I get.”

Betty smiled.

“How pessimistic can you get?”

“Surprisingly.”

She laughed.

Dudley looked at the numbers again.

They could pay for the essentials. They could reasonably afford the life they wanted. The money would probably last, and they could adjust if the future turned out differently than the computer imagined. It still wasn’t a guarantee.

Then Dudley thought about the conversation with Betty. The kids were getting older. Their parents were getting older. They were getting older. There was no Monte Carlo simulation for that.

Dudley had been trying to measure the risk that someday they might run out of money. There was another risk. They could run out of time.

Dudley changed one assumption and ran it again. Because Dudley is Dudley. The result barely moved. He closed the laptop.

Betty looked at him.

“So?”

Dudley thought about everything that could go wrong. Then he thought about everything they might miss while waiting for a guarantee nobody could give them. They had enough. Probably. And whatever came next, they were in it together.

“Screw it.”

Betty raised an eyebrow.

“Close enough.”

They were going to retire.

Dudley felt surprisingly good about this. They had the money. They had each other.

How hard could it be ?