Returns are often highly variable. In the short run, returns are unknowable, while in the long run they are nearly inevitable. For planning purposes, please consider a time horizon of 4 years or less to be the short term, 4 to 10 years to be the medium term and anything over 10 years to be the long term. Once clients have been invested for over a decade, returns should begin to approach the long-term real return targets. As one increases a planning time horizon, risk (negative volatility of returns) falls away. Clients should minimize unnecessary portfolio turnover that may trigger taxes on capital gains. Financial independence projections are made using reasonable assumptions in keeping with prescribed FP Canada Guidelines. If someone falls short in their financial independence projections, the following variables could be altered:
1. Savings Rate. Clients could save more on either a monthly or annual basis.
2. Rate of Return. Returns are predictable provided one takes a longer view.
3. Retirement Date. Waiting longer increases savings and delays depletion.
4. Lifestyle in Retirement. This is only to be considered as a last resort.
