I was watching one of my favorite financial YouTube shows the other day—the kind where two money pros walk through ordinary people’s finances and help them figure out where they stand. In this episode, they were talking with a young couple, both 35 years old, who wanted to retire in five years. They’d run their numbers, calculated their financial independence figure, and were hoping the math would make sense.
The conversation was fun to watch, but the two hosts made a mistake I see again and again in financial planning: they stacked conservative assumptions. And when you stack conservative assumptions—one on top of another on top of another—you don’t just end up with a cautious projection. You end up with a distorted one.
Let’s walk through how that happened.
The Return Assumption Problem
The first assumption they made was about investment returns. The couple planned to move into a 70/30 portfolio once they retired, but right now they were fully invested in the S&P 500.
Despite that, the hosts plugged in a blanket 7% annual return “to be conservative.”
Here’s the issue:
A 70/30 portfolio has averaged closer to 8.5% over the last 50 years.
The couple is actually in a 100% S&P 500 portfolio right now, not 70/30.
So the very first input was already significantly off.
Then They Stacked Inflation on Top
Next, the hosts assumed future inflation at 4%.
Real long-term inflation—over the same 50-year window—has averaged about 3.66%.
A small difference? On paper, yes. Compounded over decades? Enormous.
…And Then They Ignored Income Growth
The couple runs a business. They’re 35. There is almost no universe in which their income will be frozen for five straight years.
Raises, career growth, business expansion—none of it was considered.
This is how “being careful” quickly becomes being unrealistically pessimistic.
The Social Security Blind Spot
Not one word was mentioned about Social Security. And yet:
Most Americans will receive it.
It meaningfully reduces the amount you need to withdraw.
It dramatically affects financial independence projections.
Leaving it out again pushes the numbers artificially downward.
The Spending Fudge Factor
The couple currently spends $85,000 per year.
But the hosts ran their projections using $100,000 “just to be safe.”
This kind of move is exactly why so many financial plans end up saying:
“Sorry, you’re not on track. Better save more.”
Of course the plan shows a shortfall—returns are depressed, inflation inflated, future income ignored, Social Security erased, and spending inflated.
A single conservative assumption is fine. Five layered together becomes fiction.
This Is the Real Problem With Financial Planning
The quality of your plan is only as good as the inputs you use.
If every input is slightly conservative, that’s one thing.
If every input is very conservative, you’ll completely break the model.
And when you combine multiple overly cautious assumptions:
Lower returns
Higher inflation
Higher spending
No income growth
No Social Security
Those errors don’t add—they compound.
The result is a wildly inaccurate (and usually depressing) projection.
So What’s the Solution?
I’m not suggesting we become reckless optimists. But there’s a reliable middle ground:
Use realistic averages for each assumption—then apply a single conservative buffer at the end.
Here’s what this looks like in practice:
Use a historically accurate return number.
For a long-term 70/30 portfolio, that’s around 8.5%.
Use real long-term inflation.
Around 3.6%, not 4%.
Include normal income growth.
At 35, this is almost certain.
Incorporate Social Security.
Completely ignoring it creates unnecessary fear.
Use your actual spending number.
Not an inflated hypothetical.
Then—only at the very end—add a 10% safety buffer.
Example:
If your FI number is $2 million, call it $2.2 million.
This approach avoids the domino effect of overly cautious inputs while still giving you wiggle room.
Why This Matters
If you stack too many conservative assumptions, you end up with a plan that insists you’re behind…even if you’re not. Worse, you’ll likely over-save, under-spend, and live more cautiously than necessary.
People deserve financial plans that reflect reality, not distorted pessimism.
And this young couple? With more accurate assumptions, they might actually be far closer to retirement than the YouTube hosts suggested.
Did you catch this week’s episode of Earn & Invest (Click to listen)?
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Good post and it is interesting the overly conservative perspectives our financial plans can use. One of the things I have learned is that our mindset with expenses, in many cases, can be hard to quantify with our plans. If we are planners, most of us will be able to pivot to less spending in times of dire need. I think this works as a buffer with our plans and not considered as much because it is not hard, quantifiable number.
Sometimes we can have paralysis analysis and the tradeoff of giving up retirement years, or even working less, is a major price to pay.