The 5 assumptions that break most retirement calculations

Most retirement projections are not wrong in the arithmetic. They are skewed in the assumptions. After looking at hundreds of plans, the same five assumptions come up again and again. They are rarely dramatic on their own. Together, they can quietly make a solid plan fragile.

1. Returns will match the average of the last 30 years

The past three decades have been unusually good for both stocks and bonds in many markets. Falling interest rates gave bonds a tailwind that is no longer blowing the same direction. Equity valuations in much of the world are also higher than their long-run averages.

That does not mean the future will be bad. It means it is not safe to assume it will match the recent past. A more cautious planning assumption is usually 1 to 2 percentage points below historical averages.

2. Inflation stays around 2 percent

For most of the last two decades, U.S. inflation ran close to 2 percent. The past five years reminded everyone that this is not guaranteed.

For a retiree, inflation is not an abstract number. It is a direct reduction in the real value of every Social Security check and every withdrawal from savings. A plan that assumes 2 percent inflation and meets 4 percent for several years can be hit harder than most people expect.

Test your plan against higher inflation. Not because it will happen, but because it is a risk worth seeing before it arrives.

3. You spend the same amount every year

The default assumption in almost every retirement plan is that spending is constant, adjusted for inflation. Reality is rarely that tidy.

The first five years of retirement are often the most expensive: travel, hobbies, projects long deferred. The years from 75 to 85 are often lower, because active costs fall. And the last years can be significantly higher again, if long-term care enters the picture.

A more honest plan has at least two or three spending phases, not one flat line.

Retirement does not have one spending level. It has at least three.

4. You live to the average

Life expectancy is an average. A meaningful share of people live longer, so a retirement plan should also be tested against a longer lifespan. If your plan just barely reaches your expected age, you are effectively planning for a large share of possible lives to run short early.

Most serious planners recommend building to age 90 or 95, regardless of what the actuarial table says. Not because you expect to reach it, but because the consequence of missing is severe, and the consequence of hitting exactly right is living nervously.

5. Tax rules stay the same

Tax brackets, IRA rules, Social Security taxation thresholds, and Medicare premiums have all shifted during your lifetime. They will shift again. A plan that assumes 2026 rules hold through 2050 is making an assumption that no forecast really supports.

You cannot predict how the rules will evolve. But you can test how sensitive your plan is. What if your marginal rate is 5 percentage points higher? What if Social Security's full retirement age moves? What if IRMAA thresholds change?

A robust plan is not immune to policy change. But it knows where it would need to adjust.

The sixth quiet assumption: that you stay the same

There is a sixth assumption that is even quieter than the five: that you stay the same person across 30 years. Your risk tolerance shifts. Your priorities shift. Your relationships shift, and so does your spending.

Few people who wrote a plan at 55 would write the same plan at 75. That is not a mistake. It is a life that is evolving. A robust plan therefore has room to be rewritten, without it feeling like a ship changing course.

The common thread

What all five assumptions share is that they get written once and never revisited. A plan built in 2015 with 2015 assumptions is no longer a plan for 2026. It is a historical calculation.

The best advice is boring: recalculate every year. Change one assumption at a time. See where your plan is robust, and where it is fragile. Write down what you would do if a specific assumption fails.

The plan does not become true. It becomes honest. And an honest plan is one you sleep better with.

Most people who make this a habit find that an hour a year is enough. Same week, same template, same questions reviewed. Ten years later, your assumptions have been steadily updated, and your plan is the age you are.