Retirement Expenses Are Too Hard to Predict

Most people budget not for true emergencies — which are, thankfully, rare — but for what we might call predictable surprises. For example, there is no such thing as emergency vehicle or home repair. All cars and homes will require repairs and maintenance, even if you don’t know when. For true car or home emergencies, there’s insurance.

Saving for retirement in America is so difficult in part because the surprises are so unpredictable — not to mention unpleasant: inflation, outliving your money, going to a nursing home. And our insurance — Social Security — is inadequate. The impossible task of retirement planning reminds me of a New Yorker cartoon I cut out and saved for so long it’s turned yellow: One member of a couple looks up triumphantly from a kitchen table covered in papers and says, "If we take a late retirement and an early death, we’ll just squeak by."

Social Security ought to be a nearly perfect way to manage retirement uncertainty: Social Security pays a benefit no matter how long you live and is adjusted for inflation. But it’s too small to live on, so we must have other sources of income.