In the late 1960s one of my favourite TV comedy programmes was Hogan’s Heroes. It was set in a German Prisoner of War camp. One character, Sergeant Schulz, had a catch phrase “I know nothing” when the activities of the captives could lead to his easy life being disturbed. He did not want to be responsible for any ructions that could be caused.
After the overthrow of Saddam Hussein had created issues that were not as easy to solve as expected, Donald Rumsfeld once said, “There are known knowns, there are known unknowns, and there are the unknown unknowns.”
Confidence in experts is greater when they are honest about the extent of their knowledge. This is not to advocate taking Sergeant Schulz’s catch phrase, “I know nothing”. as being the best approach. No one would take the lead from such an ‘expert’.
I am often amazed that one of the great wins for science was that the Apollo missions were based on Newton’s gravitation theories. The missions had two successes, not only did they get a man on the moon and back, but for the physicists they moved Newton’s theories into facts. If there was an unknown unknown that disproved Newton’s theories we may still be thinking about how to get a man on the moon and back.
In my adult lifetime I have never felt the world feel so uncertain. The impacts of global warming and climate change, the recent pandemic, stresses on world order and stresses in many countries on societal order. How does anyone make sense of them and have a feel for the future? There are so many moving parts affecting our lives and many are contradictory.
I am not an epidemiologist, so I know nothing. But for the pandemic there appear to be three possible scenarios.
- If you are optimistic then you will believe a vaccine will be quickly developed and by spring 2021 most of us will be immune and we can begin to rebuild without restrictions.
- A more realistic person may hope for a vaccine but believe that total immunity will be several years away. Their outlook is one where restrictions will have to apply so that we can live alongside the virus with minimal risk of future major outbreaks.
- A pessimistic outlook is that we do not live easily with the restrictions and there will need to be continual local and regional lockdowns for many years to come.
The pandemic is a known unknown. Around the corner there could be another catastrophe we need to cope with that could affect our health and the global economy. I am thinking here of a once in 200-year earthquake, volcanic eruption or solar activity. These are the unknown unknowns that could occur next year or in over 150 years’ time but have a massive impact.
I am reminded of a colleague who many years ago, retired in his early 60s, with many people suggesting he was not old enough to so. He was healthy, very active, and all who knew him believed he and his wife had many years of an active retirement before them. Shortly after came the news that he had Parkinson’s disease, which was soon followed that he had entered a nursing home where he would spend many years.
We can help our clients plan their retirement as if it is going to be one happy event after another, sailing on the cruise ship of retirement into the sunset. However, as the pandemic has illustrated, unfortunately life is not like that.
What could go wrong? We know nothing. The costliest retirement is probably one where the retiree is active much longer than would be expected, followed by a quick decline in health, that is not terminal, needing a much longer period receiving care than many others experience.
Retirement income financial planning is a double-edged sword. The pleasant conversation is planning for the best and helping clients understand how it is possible to meet their retirement goals. The other conversation that must also be included is what could go wrong.
This second conversation is important as it prepares the client to consider how they would react, if a partner dies prematurely, becomes in need of care and so forth. While this opens the door to ensuring necessary powers of attorney, wills and if need be, funeral plans are in place, it also ensures clients are aware that the family home may have to be used to help finance those eventualities.
The saying, ‘two people can live together as cheaply as one’ is incorrect. Statistically they can live together as cheaply as one and a half people. Therefore, if one partner moves into a care home, the one remaining at home requires 75% of the couple’s joint income. Care home fees will have to be found in addition and the change of lifestyle also must be funded. The same holds true if the person needs care at home but the mathematics do differ slightly.
We know nothing. Will such an eventuality occur? If it does when? For how long will it continue?
As recent events have shown, being prepared can be a lot less costly and traumatic than being taken by surprise. Sometimes it is better to know something.
Bob Champion is chairman of the Air Later Life Academy
