In February 2002, Donald Rumsfeld, then US Secretary of State for Defence, intelligently explained the limitations of intelligence reports: “There are known knowns. There are things we know we know. We also know there are known unknowns. That is to say, there are some things that we know we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know.”

While it could be argued that this tongue-twisting logic was used to befuddle a media probing too deeply for White House comfort, there’s no denying the simple wisdom of this statement. When it comes to preparing for retirement, it pays (literally) to keep this nugget at the forefront of your mind.

Plan for retirement by acknowledging your ignorance

A lot of jobs look easy when you’re not the one doing it, but the challenges faced by someone in the arena are often invisible to those in the crowd. The financial world is a deceptive one. We all deal with money every day. It has a massive impact on just about every aspect of our lives, so you could be forgiven for thinking you know everything about it. But do you? Really?

The concept of retirement is, at most, two generations old. Before the Second World War, most people in the Western world worked until they died. That was the expectation and the reality. The labour force participation rate of men aged 65 and over was above 50% until the 1940s. Suffice to say, retirement is a recent phenomenon.

If you’re thinking about planning for retirement, the first step is acknowledging the known unknowns. Listening to friends, reading books, watching YouTube – however you do it, learning more about retirement should provide an indication of how little we know, of how complex it is compared to what we may initially have thought. And if you aren’t uncovering some elements you had never contemplated – the unknown unknowns – then you simply aren’t looking hard enough.

The financial world is constantly in flux. New rules and regulations are being introduced all the time that impact our lives. It’s hard to keep up to date, particularly as we get older and have more on our plate. The danger is that we don’t take this into account when making important decisions. Instead, we view the information at hand with our own understanding of how the world works, neglecting the unknown unknowns.

Oftentimes, our understanding is misinformed. Perhaps we have incomplete information or are acting based upon a prior negative experience. Maybe we’re victims of rotten marketing (no one is immune to this). Not to mention that many, many of us misjudge the benefits/consequences of our own actions.

Act now and seek counsel

Coming to terms with this shouldn’t be intimidating. It’s always better to respond to a challenge rather than brace for a catastrophe or hide from a problem. Embrace your impending retirement; don’t fear it. If you feel you don’t have enough to retire on, what options do you have to avoid baked beans on toast every night?

• Switch to part time and keep working a bit longer?
• Increase your exposure to growth assets?
• Lower your expectations on what you need to live on each year?
• Take up smoking to reduce your post-retirement years?

This list isn’t exhaustive. There are more options which you’re probably aware of, and many that you aren’t even aware exist.

We live in a world of specialists. These days, everyone is looking for a niche to make themselves necessary. Consequently, we end up being excellent at a few things and not much good at everything else. When it comes to something as emotional and impactful as money, it pays to seek the counsel of somebody who has made the financial world their niche.  

Keep in mind when planning for retirement that it’s never as good as it looks and never as bad as it seems. There are always options to explore – you just need to make them known knowns. At Pride Advice, we can help you do just that. Get in touch today.