I probably had my first taste of being conservative when I was a child during the Great Depression. My parents had become risk-averse, mostly out of the need to preserve scarce capital after much of their savings disappeared in the stock market. But I learned my own lessons too.

Shortly after I went to work for Boeing, I contacted a stockbroker to help me with investments. He got me into a number of small companies that promptly lost money. None of his optimistic projections of growth came true.

When I was head of planning for Boeing and had to portion out research funds, every organization would promote its case. Almost always, they used optimistic projections. I remember adding up all the projected sales for various military projects wanting research funds and realizing that the total of their sales projections exceeded the likely military budgets.

After I retired, I read up on various retirement planning methods. Almost all of them used optimistic portfolio returns from history and left out many things that influenced retirement spending and income. I still find fault with suggested returns. They do not account for the appreciable costs that bring down actual returns, or recognize that most people buy and sell at inopportune times. Further, retirees can suffer greatly from reverse dollar-cost averaging, as my research shows in J. K. Lasser's Your Winning Retirement Plan.

KNOW YOUR UNK-UNKS

An important reason to be conservative in financial planning is what we in the defense industry used to call unk-unks. This stood for unknown-unknowns, a term used to emphasize the point that certain situations are really unlikely to be considered in advance. Unk-unks can apply to emergencies in your own household, and events in the lives of your adult children or elderly parents. Once I surveyed my retired friends to find out about events that most upset their retirement plans. The biggest was the divorce of a daughter with children and next was the need to supplement the incomes of impoverished elderly parents.

Then there are the things you could have planned on had you thought about it enough. In the construction industry we called these OSIFs-short for "Oh, shoot, I forgot," except we used a stronger word than "shoot."

In the more comprehensive planning programs on my website, www.analyzenow.com, I include a special event worksheet that encourages people to think about such things as what it might cost to replace a roof, buy an automobile, etc. If you don't plan on how to pay for big-ticket items, you might end up taking out a loan-which can almost double the cost. Retirees and older working people have to learn to save money for a future purchase, not buy the item and then pay for it over time.

LOOK AT DATA CAREFULLY

Sometimes being conservative means you have to look at the data very carefully. It's not conservative to base a plan on a diminishing need for money as you age. I have numerous elderly friends who spend far more now than they did early in retirement because they can afford to-as do my wife and I. Even those elderly that are inactive and have sufficient savings spend more late in life because they can afford quality assisted care instead of being a burden on their children. In addition, it's the elderly that need the most medical care.

I was very successful in managing projects and organizations in my working years. I feel this was because I was conservative. Now after more than 20 years of retirement, I believe I can say the same thing about my retirement years. Being conservative can really pay. Never base your future on "averages" from the past or the hope that you will be able to "get by" or that something good will pop up to save you. You might as well buy a lottery ticket to get the money for your later years.

Henry K. Hebeler is author of J.K. Lasser's Your Winning Retirement Plan and Getting Started in a Financially Secure Retirement. His website is www.analyzenow.com.