Chasing the wrong number
Why a higher probability of success score leads to a higher probability of regret
A couple of years ago, I met with a client to review her retirement plan.
The plan’s probability of success score: 85%.
Her first question: “How do I get that number up to 90?”
Five points. That's what she was focused on.
I’ve had this conversation more times than I can count over the years.
And I get it.
An 85 out of 100 looks like a solid B on a test. Of course you want an A instead.
But the score isn’t measuring what most people think it’s measuring.
What the score actually measures
Probability of success measures one thing: whether you’ll still have money left when your plan ends.
And your plan ends when you run out of blood pressure, though we don’t know exactly when that will be.
It has nothing to do with how well you lived.
It only tracks whether your money lasts.
To guarantee money remaining in every possible future — every bad market, every inflation spike, every longer-than-expected life — you have to plan to spend less than you could in many of those potential futures.
Here’s what surprises most people: the spending level most likely to be right for you produces a score of around 50%.
A 50% score is the middle of the distribution of potential outcomes.
This means you have the best chance of spending an amount that isn’t too much or too little.
That’s just how the math works.
But 50% is also a letter grade of “F” and no one wants to fail their retirement, right?
So if you’re targeting a score of 80%, 90% or higher, you’re deliberately planning to spend less (maybe MUCH less) than you could afford.
You’re leaving your life on the table. Not just your money.
This is Goodhart’s Law in action, which states:
When a measure becomes a target, it ceases to be a good measure.
Flip the number around and it gets a little more useful.
An 85% probability of success could also be considered a 15% likelihood that your plan will need to be adjusted at some point.
That’s closer to how retirement actually works than a single pass/fail score.
But don’t stop there.
Even a plan with a 100% score will inevitably need adjusting.
Markets move.
Spending needs change.
Life happens.
No score, however high, gets you out of that.
The risk hiding on the other side
We spend almost all our energy worrying about running out of money.
But there’s another risk: spending so carefully (or fearfully) that you’ll eventually look back with regret.
The Disney trip with the grandkids you kept postponing.
The things you passed on because you were worried when the numbers would have been just fine.
That’s the real cost of chasing a high probability score: playing it so safe that you miss your own retirement.
And your own life.
A better way to think about it
Instead of a score, think of guardrails.
One guardrail keeps you from running out of money.
The other keeps you from spending so little that you’re not really living.
A good retirement income plan sets and monitors both.
It starts with a spending level that’s reasonable and sustainable, then monitors if you’re spending needs to be adjusted based on your personalized guardrails.
If the portfolio falls below the lower guardrail, that’s the signal to trim back on the discretionary spending — travel, gifts — until things recover.
If it exceeds the upper guardrail, that’s the signal to spend some more, not less.
Either way, it’s planned (and we discuss it) in advance.
You’ll know what would trigger a change and what that change looks like.
In dollar terms. Not percentage scores.
This means fewer surprises.
That’s a different conversation than watching a percentage score bounce around and wondering if you should be worried.
And you can’t spend your percentage score at the grocery store.
Questions worth asking about your plan
What spending level are we actually planning for, in dollars per month?
What would trigger a change, up or down?
Am I spending within my means, or well below them?
What does a good retirement look like for me, and is the plan built around that?
That client who wanted 90%?
We talked through what the score actually meant, then rebuilt her plan around guardrails instead.
She’s spending closer to what the math always said she could — and she took the grandkids to Disney a few months ago.
Bottom line
The goal isn’t a higher score. It’s a well-lived, regret-free retirement.
— Russ