Why averages can mislead in retirement plans - and how to move beyond them
In much of what we do and think, the concept of averages is so deeply embedded that we barely notice it is there. We look at averages in sports, medicine, financial markets, economic forecasting and political polling. But averages can be misleading—and in ways that are not always well-understood.
Look at the exhibit below. From two very different individuals, 24-year-old Mary and 60-year-old Phil, an average can be deduced— a 42-year-old we’ll call Average Joe. And yet there is not the slightest resemblance to either Mary or Phil.
The flaw of averages: Average Joe bears not the slightest resemblance to either Mary or Phil
CHARACTERISTICS OF 24-YEAR-OLD MARY, 60-YEAR-OLD PHIL AND A COMPOSITE AVERAGE AMERICAN, AVERAGE JOE