A few years ago, I came across this quote by Blaise Pascal, a French mathematician, philosopher, and scientist who lived nearly four centuries ago and who became a devout Christian and defender of the Faith (comments in brackets are mine):
Belief is a wise wager. Granted that faith cannot be proved, [and I would add that the existence of God cannot be disproved] what harm will come to you if you gamble on its truth and it proves false? If you gain, you gain all; if you lose, you lose nothing. Wager, then, without hesitation, that He exists." – Blaise Pascal (1623-1662)
Of course, Messrs. Pascal is teaching us a lesson about the consequences of belief in God (and more specifically, the saving work of Jesus Christ) and how it is ultimately logical. It is used quite often as an apologetic for the Christian faith, or, at least, an inducement for atheists and agnostics to consider the claims of the Bible.
Pascal's Wager reminds us, very poignantly, of our tendency to not prudently consider the consequences of our decisions in relation to the possible outcomes. Interestingly, it can also be applied to retirement stewardship. "Well, that's certainly a bit of a leap", you might say, but please bear with me on this.
An article in the September 2007 edition of Financial Planning magazine, titled Bet on Longevity, draws an interesting parallel between Pascal's Wager and the commonly overlooked risk of outliving your money in retirement: (comments in brackets are mine):
…the consequences of not believing [that you will live a long life] are more severe than the consequences of believing. If you're wrong, you lose nothing; [other than the near term use of some of your resources] if you're right you win everything… [Living in dignity during your later years]
…with today's expanding life expectancy, the reality is that [you] might live to age 90 or beyond. The consequences of not having properly prepared his or her finances could be depending on children [for financial help] or even applying for welfare…
The point of Pascal's Wager is that the consequences of a choice may be far more important than the likelihood of its outcome…
I agree that Pascal has indeed also given us a framework for a very strong argument for minimizing "longevity" risk through wise retirement stewardship, specifically in terms of long-term planning, saving, and investing. ("Longevity risk" is used in the financial community to refer to the risk that you may have more life than you do money.)
Problem: we don't know how long we will live
That is a fact and the crux of the issue. You can guess how long you may live based on actuarial (life expectancy) tables – that's what life insurance companies use: your family history, your current health, or other factors. But the reality is that we really can't know how long we will live – only God does. If fact, he has predetermined how long that will be:
Since his days are determined, and the number of his months is with you, and you have appointed his limits that he cannot pass. Job 13:4 (ESV)
Unfortunately, he rarely if ever shares that information with us! (Did you hear the one about the angel that visited a golfer to tell him the good news about all the beautiful golf courses in heaven; but then the bad news…"and by the way, you have a tee time at 9 AM tomorrow"?)
Part of wise retirement stewardship is dealing with this uncertainty – the "risk," if you will – as it relates to being as financially well-positioned as possible for a long life, perhaps longer than the actuarial "average."
But long life is a blessing from God
In the Bible, a long life is considered a blessing from God:
The fear of the Lord is the beginning of wisdom, and the knowledge of the Holy One is insight. For by me your days will be multiplied, and years will be added to your life. Proverbs 9:10-11 (ESV)
Yet we know that not all will be blessed with long life, and that can be a great mystery to us. We must let the explanation for that remain hidden in the deeper mysteries of the sovereignty of God.
But what if you live longer than you "planned"? If you "bet on longevity" (plan, save, insure through annuities, etc.) and die sooner, you "lose" nothing. (Although, as I asserted above, one could argue that you have lost the use of some of your assets to make life more enjoyable in the short term.)
If you live longer than you "planned" and fail to invest and insure accordingly, you may face a much less favorable outcome. The consequence of this choice (running out of money) outweighs the likelihood of the potential outcome (living longer).
Faith and risk
Ultimately, retirement stewardship is all about faith and longevity risk management. Faith in that we trust in God's wise sovereignty concerning our preordained lifespan and his ability to provide for us for as long as we live. Risk management in that we should do what we can to reduce the likelihood of an unfavorable outcome in terms of our financial preparedness, which results in an unfavorable consequence (dependency on others).
The risk that we face in retirement is brought about by uncertainty. But it is we who are uncertain about the future, not God. So, in terms of the choices we must make, both risk and uncertainty apply.
Some risk is quantifiable, uncertainty is not. Uncertainty arises from our imperfect knowledge of when certain things will happen and why they will happen. Most importantly (and this gets into the investing area as well), uncertainty relates to questions about how to deal with the unexpected or even the unprecedented and whether things will be tomorrow as they have been in the past.
It's also important to understand that we may "calculate" risk in terms of probability of an outcome, such as with rolling a pair of dice. Uncertainty, however, is more of a condition typified by the lack of sureness about something and is highly subjective and, therefore, not quantifiable. Risk and uncertainty may influence each other but they are not one in the same.
Tying it all together
Let's tie some things together with some simple examples using Pascal's Wager as a basis:
- Whether or not there is a God: Uncertainty
- What you choose to believe: Choice / Risk
- God's existence or non-existence: Outcome
- Heaven or Hell: Consequence
Now, applied to retirement stewardship:
- The length of your life: Uncertainty
- How you plan/save/invest: Choice / Risk
- Your actual lifespan: Outcome
- Solvency/in-dependency or insolvency/dependency: Consequence
Pascal's Wager certainly helps us provide a compelling illustration of choice, consequence, outcome, and the relative concepts of risk and uncertainty. But the primary lesson is pretty clear. To paraphrase Pascal's Wager and apply it to retirement stewardship:
Absent of any plain facts to the contrary, belief that God will grant you a long life is a wise wager. Granted that we cannot know for certain what our lifespan will be, what harm will come to you if you gamble that it will be long and that proves false? If you do, and live a long life, you gain much; if you do not live that long, you lose little as compared to what you would have gained. Wager, then, without hesitation, that you will live a long life unless you have very reliable knowledge to the contrary.
So, I would say that Pascal's Wager provides us with some very wise advice when it comes to retirement stewardship, just as it does in the consideration of things with more eternal consequences.