Weekend Reading: Cover the Average Case, Look Out for the Extreme Case

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend reading average case vs extreme case Weekend reading average case vs extreme case
Weekend Reading

When there is a risk to everything, how do you confidently plan for the future? Try focusing on what you can control, which includes taking the following steps:


📌 Protect against “average risks”: As a general rule, this might mean simply wearing your seat belt. In the case of protecting your life savings, other examples could be creating a strategic income plan or buying long-term care insurance.

📌 Build redundancy, but accept you’ll never be able to cover every scenario: Unfortunately, a zero-risk investment doesn’t exist. This is where risk management comes in, but it should be a delicate balance. Insurance is a great layer of protection, but you don’t need a surplus of policies. Emergency savings are necessary, but you likely don’t need 5 years’ worth stuffed away.

📌 Default towards optimism, although pessimism feels safer: As Mr-Stingy says, “You can’t live your life based on fear of low-probability events.” Instead, be a “realistic optimist” and have faith you’ll be able to figure things out.

📌 Catch the upside of asymmetric opportunities: Good, low-probability things have the power to change your life forever. Writing a book may not mean you become a worldwide best-seller, but what does it hurt to try?

You shouldn’t let the possibility of something happening dictate all of your financial decisions. Look at your own unique financial situation and leverage a comprehensive framework so you can ignore the news headlines and enjoy the here and now.