Uncertainty is high. The World Uncertainty Index, which measures this psychological state, is as high as during the pandemic. More recently, it reached these levels at the start of Trump’s first term. Given the scale of the current policy realignment happening, I expect it may rise even more.
There are so many questions. To what extent should we account for these changes when we don’t know which policies will stick? Just last week, tariffs on imports from the USA’s biggest trading partners were being considered. This week, they’re being reconsidered. Tariffs impact inflation, a key economic indicator central to all financial planning models.
The uncertainty is particularly frightening for people contemplating retirement. How do they plan for potential decades without employment income when the economic landscape is so disturbed?
It is tempting to counter uncertainty with action. One of the reasons people love Trump is his willingness to act with seemingly little regard for consequences. Humans prefer action over considered, slower responses. It feels safer to act than to wait or, worse, to do nothing.
Yet even those with deep financial understanding cannot predict how it will all play out. Perhaps because of their deep understanding, they hesitate to give strong views. They know that it is too complex. Asset growth, interest rates, and inflation are all correlated and interdependent; adjusting one element shifts the other. Even the nature of interdependence changes during economic policy changes — assets that once seemed safe can become risky.
However, deep financial understanding is not useless in these times. Returning to the basic mechanics of the economy and how policy changes work through the mechanics can help to understand potential outcomes.
Scenario planning has become essential. We can no longer rely on simple models forecasting linear growth for decades. Using different inputs, we can explore different outcomes. Those who understand hidden risks and their impact on retirement strategies will be better prepared. Scenario planning helps retirees grasp their options—primarily how much leeway they have in their spending.
I love using financial models to help people imagine the parameters of their retirement future. The intersection of the human and mathematical fascinates me. This work is meaningful because it helps people transform uncertainty into concrete consequences for their own lives. I see the relief and hope that emerges from that clarity, even amid all the anxiety and uncertainty out there.
It turns out that the antidote to uncertainty is complex planning.
Ps. If you would like to explore your own retirement planning, join us for our annual Retirement Workshop in Johannesburg on 26 March 2025. This free workshop is an ideal opportunity to put aside a few hours to think about your future and is ideal for those about a decade from retirement or in early retirement.
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Kind regards,
Sunél