Cracks in your crystal ball – the problems with projections

Projections predicting the future rise and fall of savings are often used in do-it-yourself and professionally assisted financial planning. These analyses promise great potential as they speak to important questions like “How much will I have?” and “Can I retire now?”

The problem is that all projections are wrong. In many cases they provide a false sense of security. In my experience not all understand the assumptions and limitations that underlie these forecasts - the most important being volatility.

Learn more in this article which studies over 100 years of Australian investment and inflation history

This was prepared in response to a request by the Australian Securities & Investments Commission (ASIC) for input to “Consultation Paper 101 : Superannuation Forecasts” which deals with “the provision of superannuation forecasts (ie. estimates provided to consumers of the likely balance of their superannuation investment at retirement”).