In his April cover story, Harold Evensky listed the questions that clients want answered as they contemplate retirement. "How much can I spend? How much should I save? How long should I work? How much can I afford to give to my children? How much do I need?" When clients look to us for guidance on these critical issues, our prescriptions are unavoidably based on assumptions about future returns for stocks and bonds.

After more than a year of wrenching declines in popular stocks, Wall Street's wisdom seems to be that a "market bottom" is forming and before long the good times will be rolling again. Advisors who naively guide spending, saving and gifting decisions based on the investment returns of recent years could do irreparable harm, especially to retirees. A fresh reality check may be in order.

Remember When You Believed?

I was seven years old that year. I remember waking up early the morning after Christmas, still energized by the thrill of the big day. Mom and Dad and my three sisters were still sleeping upstairs. There were a few empty Coke bottles and coffee cups on tables in the living room, where my grown-up relatives had been chatting and laughing the night before. Toys and presents had been pushed more or less back under the Christmas tree with scraps of wrapping paper that had escaped the hurried cleanup.

I picked up my Humphrey Pennyworth wind-up toy and gave it a few spins around the carpet, but then I started feeling, I don't know, a little empty. I lay on my back on the couch with my hands clasped under my head and my little feet perched up on the arm, and I stared out the window at the gray winter sky. The sad realization came to me that on the day after Christmas the magic is gone, completely gone. And it would be 364 long, boring, normal days before it comes 'round again. After all these years, I still remember that sinking feeling the morning after Christmas, the letdown from euphoria to cold reality. But the worst was yet to come.

The next December, our cold Ohio weather and seasonal decorations in school began to stir in me the annual excitement about Christmas. I wanted real cowboy boots that year, and I was hoping against hope for a wristwatch. Was this a great time of year or what? One afternoon, I was walking home from school on Wilson Street, keeping a respectable distance behind my younger sister Molly and a few of her second-grade girlfriends. As long as I live, I will never forget hearing Molly say quite matter-of-factly to her companions, "Well, I know there is no Santa Claus. Last year I sneaked downstairs and saw Mommy and Daddy putting everything under the tree. Daddy was drinking the hot chocolate and eating the cookies we put out for the reindeer."

I didn't let the shock show on my face, and I purposely kept up a brisk gait the rest of the way home as I let this devastating news seep into my soul. Before, it was just a long wait between Santa's annual appearances; that was bad enough! Now I realized it was never going to happen again. This was easily the worst day of my life.

What Is Real?

Sometimes, there is a fine line between the real world and the world of our imagination. Other times, the delineation is ever so plain, but we prefer to blur the distinction because the imagined world is more pleasant than the earth-bound version.

The myth of Santa Claus is a good example. Generation after generation of parents perpetuates the story, even though they were personally devastated when reality snatched their dream from them as children. I suppose parents believe that the few years of innocent delight are worth the inevitable pain of disillusion.