The pessimistic projection in the NewRetirement software is a feature that will support you as you create a plan to achieve financial security by assessing the probability that you will achieve your goals, evaluating risks you may face, and understanding the importance of preparing for contingencies.
Your relationship with the Pessimistic projection will be influenced by your life experience, personal views, and temperament.
If you are someone with a strong desire for stability, or prefer conservative, or worst-case-scenario modeling, you may prefer a pessimistic projection that that models a high Chance of Success and/or is fully funded.
If you are someone who is more comfortable with risk and contingency planning, you may not mind a pessimistic projection that models a lower Chance of Success and/or is not fully funded.
Either way, viewing your plan under the pessimistic assumption can help you identify strengths and weaknesses. Once you’ve done that, we encourage you to take additional relevant steps such as exploring alternative scenarios or using our optimizers to help you identify actionable steps that will empower you to do better with your time and money.
You may also want to bear in mind that in a Pessimistic Projection your inflation assumptions may be equal to or higher than your rate of return assumptions. In this case, expenses will grow at a higher rate than accounts year over year. When this happens, your income may cease to fund all of your expenses at some future point in time.
For further discussion around preparing for contingencies you may wish to view the article How can the PlannerPlus Budgeter help me strengthen My Plan?