Here are a few assumptions that you may have heard during your many years in the trenches as a financial planner:

* Assume the U.S. economy is going to average 3%-4% growth for the next 30 years. Assume the Chinese economy will grow by 7% per year during that time.

* Assume that one of your clients without adequate savings can continue to work until at least age 75. Assume that your client will live until age 110.

* Assume that the total return on stocks in a portfolio will average 8% per year. Assume that the expected return on a pension plan's assets will be 7.5% for the life of the plan.

* Assume that the basic structure of the U.S. tax system and economy is not going to change. Assume that the debt loads throughout the economy will be resolved without any real change to business as usual.

You're probably making those assumptions, or something like them, each and every day in your advisory business. Most financial planners do, and they don't even realize it. Every time planners make retirement projections or asset allocations, or run a Monte Carlo simulation, the calculations are based on a view of how the world works, and this view tells us what it is reasonable to expect in the future. The problem is, we rarely think through the implications of those beliefs.

Specifically, most financial planners don't examine the numbers in their assumptions and scenarios to see how they would work in the real world. Without this kind of analysis, initially sound projections can spin out of control.

GROWTH SCENARIOS

For example, one of the first things financial planners learn is the concept (and power) of compound interest. Three percent real growth produces a doubling every 25 years or so; 7% growth translates into doubling every decade.

In 50 years-well within the planning horizon of many clients-3% growth would give us an economy four times as large as today's. Seven percent grows by a factor of 32 in a half-century.

The numbers work-just read your calculator; it's reality that fails.

Try to imagine a world with four (or 32) times as much production and consumption as we have today. Even at the bottom end of the range, will there be four interstate highway systems? Four Shanghais? Four Mexico Cities? Four times the production of food?

Where will the water come from, and the energy, to make this happen? What about the pollution?

And if you can answer these questions, will growth suddenly stop in 2060? Or will the next half-century see those levels grow by another four (or 32) times, so we'd have 16 times what we have now?

Economist Herb Stein famously said, "If something cannot go on forever, it will stop." Before making any long-term assumptions about the rate of growth of a portfolio or the economy, ask whether there are limits to growth (or decline) that might apply in a particular situation. If you choose to believe that there are no limits, and nothing is impossible, at least make those beliefs explicit, so that your clients or others who rely on your numbers can judge for themselves whether to accept them.

The recent housing bubble was based on the belief that housing prices would never decline, and in fact that these prices would continue to grow faster than inflation and the general level of the economy. Those who expressed such beliefs (including many prominent officials and investment leaders) clearly didn't run the numbers.

If the real price of homes grew even 2% per year faster than incomes, at some point the ratio of house payments to total income would rise to an unacceptable level. This fact was hidden for a long time by falling interest rates, but eventually, there weren't enough people who could afford ever-rising prices without an expectation of being rescued by even higher prices, and the bubble popped.

RETIREMENT SCENARIOS

The question of aging is another one that frequently arises when projecting how much money someone will need for a comfortable retirement. Some life extension enthusiasts suggest that life expectancies will soon extend well beyond 100 years.

Yet the super-short list of super-centenarians on Wikipedia includes only 80 confirmed and 65 unverified cases worldwide of people now living past the age of 110, only 45 confirmed and 20 more claimed over the age of 111 and 20 confirmed, plus four unverified over 112. Since longer life assumptions reduce the amount of spending someone can do today, it seems imprudent to assume such a low-probability event.