How to use the Retirement Calculator 3.0
There are 6 inputs for Initial Savings, Expected
Inflation, Annual Withdrawal, Stocks, Bonds and Management
Fees. The Cash field will populate a number based on your
mix between stocks and bonds. Once you do this you can click
on the calculate button underneath Stocks, Bonds and Cash
to get your Results. The Results are at the top of the Calculator.
Retirement Cacluator has developed this simple
planning tool to analyze the impact of withdrawing money from
your savings during adverse market conditions and allows you
to optimize your asset allocation between stocks, bonds and
cash, providing a safe and worry free source of income.The
last 50 years of stock market and bond yields have been analyzed.
The Retirement Calculator assumes that you are unfortunate
enough to begin withdrawing money at the beginning of the
worst economic downturn, which was the 1973 - 1974 time period
and includes the most recent downturn 2000-2002. You can click
on the Definitions button at the very top of the calculator
to get definitions for the calculator.
The Retirement Calculator allows you to adjust
your asset allocation to optimize your withdrawal rate and
produce the highest final savings during a 30 year period.
When using the calculator, you can input values for initial
investment, % management fee, % expected inflation, bonds,
stocks and annual withdrawal amount. The Retirement Calculator
then charts a 30 year projection of your investments performance.
Retirement Calculator has included a new feature for how managment
fee's impact how long your money will last. It also calculates
the actual rate of return and compares it to the hypothetical
return you would achieve using a single long term historical
average. As can be seen in most cases actual return rates
are significantly lower. This is because you began withdrawing
savings during a falling market. Historical returns for stocks
were based on a stock portfolio of 70% U.S. large caps, 15%
international and 15% small caps. Bond yields were based on
30 year U.S. Government bond yields. Standard indexes of the
S & P 500, Russell 2000 and MSCI EAFE for international
stocks were utilized. Other measures of historical performance
would be impacted similarly.
The most important input by far required for
any retirement calculator is the interest rate you can expect
to receive on your investments. All other calculators either
use long-term historical rates of return for stocks, bonds
and cash; or use an overly conservative interest rate. Even
worse yet some leave it up to you to determine your own interest
rate. All these can lead to erroneous results. |
