The Design Flaw Hidden in Most Retirement Models

The biggest risk to a retirement plan isn’t inflation, underperformance, or even longevity. It’s believing you’ve accounted for all the variables — when you haven’t. 

Most retirement models offer comforting numbers. If only comfort and clarity were the same thing. Behind the polish, they rely on a static view of the world that simply doesn’t hold up over time.

Most are quietly built on an impossible assumption: that nothing meaningful ever goes wrong. That inflation stays steady. That markets rise at a tidy average each year. That drawdowns arrive in perfect order. 

It’s not that the forecasts are dishonest — it’s that they’re too tidy. And nowhere is this more obvious than in the way retirement calculators project the future: a straight line through a world that doesn’t behave that way.

The Illusion of Precision

The appeal of online calculators is undeniable. They’re clean, they’re quick, and they give an answer.

It feels reassuring. Scientific, even.

But its answer is only as reliable as the assumptions built into the model — and nearly all of them rely on a single, fatal error: that the market delivers the same average return every single year.

This is a design flaw so significant that, in engineering terms, it’s like building a bridge based on last Tuesday’s weather.

Sure, there is in fact a number that represents the average over the last 40 years, but that’s not anything like experiencing that same number every year, like it’s Ground Hog Day. 

Because if that were true, there’d be no Trump tariffs. No recessions we had to have. No bull runs or black swans. Just steady-as-she-goes.

However markets — and lives — don’t work that way.

It’s not that the creators of these tools are trying to deceive anyone. It’s that most forecasting tools are built for simplicity, not accuracy. But retirement isn’t simple. And accuracy matters.

The Numbers Don’t Add Up (And Industry Knows This)

Late last year, Super Consumers Australia conducted an independent survey of 50 of the largest super funds in the country, tapping into their online retirement calculators. Their conclusion? 

“Not fit for purpose.”

For starters, using identical inputs, they found discrepancies between calculators. The greatest disagreements observed were final projections differing by over 40%.

Same person. Same balance. Wildly different answers.

The reason? Every calculator makes different assumptions about investment returns, inflation, longevity, and drawdowns — and most assume that those factors remain static throughout retirement. Same weather every day, so to speak.

The disclaimers are there, of course, buried in the fine print: “Returns remain constant throughout the projection and actual results may vary.” This does nothing to inform the real risk: that these calculators are presenting a single, best-case scenario dressed up as reliable guidance.

Averages Aren’t Real

The heart of the problem is a mathematical sleight-of-hand: reliance on average returns.

Let’s say your retirement plan assumes a 7.5% return. On paper, that seems reasonable. But how those returns arrive — the sequence — makes all the difference.

Consider two retirees with identical balances and identical average returns. One gets the good years early. The other gets the bad years first. The first stays retired comfortably forever. The second runs out of money a decade too soon, when it’s too late to do anything about it.

Same average. Very different outcomes.

This is called sequence risk, and it’s invisible to a straight-line forecast. But it’s very real to anyone who retires the year before a downturn.

A Better Way: Full Spectrum Forecasting

The real world is unpredictable. It follows that you can’t plan your retirement using a model that assumes predictability.

Full Spectrum Forecasting uses a different approach — a model that simulates possibly thousands of different market sequences, inflation scenarios, and lifespan combinations. It stress-tests your retirement plan against the good, the bad, and the ugly.

What you get instead of a single answer is a range of outcomes. And within this range you have a probability number — what you might call your Retirement Resilience Score. This number is a measure of the confidence you’re entitled to feel about how long your money will last under all the different futures that could unfold.

Want to retire at 65 and draw $120,000 a year? This type of model will show you whether that gives you a 95% chance of success or a 50% coin toss. Forewarned is fore-armed – and knowing this also gives you the power to do something about it in advance, shifting the balance of probabilities your way.

How Much is Enough? How Long Will That Last?

If you’ve accumulated a reasonable nest egg — whether that’s through sustained earnings, disciplined saving, or successful investing — and think you’re within sight of the finish line, the question often shifts from “Do I have enough?” to “How do I make it last?”.

And that’s where the modelling really matters. If a multi-decade retirement were a straight road, then any calculator would do.

What you’re ultimately trying to assess is resilience — not under ideal conditions, but across the full range of scenarios you might encounter. That includes market volatility, inflation shocks, longer-than-expected life expectancy, and the sequence in which investment returns actually show up.

Being Prepared for Reality

This means planning for every eventuality, not just hoping for fair weather. It matters (of course) because you don’t get a second chance at this. When it’s late in the game, you simply can’t afford setbacks or missed opportunities. 

Good decisions start with clear, reliable information. The problem with straight-line forecasts is they dissolve all the chaos into a smoothed-out line. 

If your retirement plan deserves better than a stick figure drawing, Full Spectrum Forecasting is a meaningful next step.

Further Reading: The Case for Full Spectrum Forecasting

If you're curious about how this kind of modelling works in practice, I've put together a short walkthrough that explains it in plain English — including how to interpret a Retirement Resilience Score, plus the four levers you can pull to stack the odds in your favour. You’ll also see an example of what a full spectrum forecast actually looks like in action.

See how long your money might last across thousands of real-world scenarios.