5 Replies Latest reply on Jan 9, 2010 7:12 PM by AnnaLee

    retirement calculators

    hoppy
      Which seem to be the most reliable/functional calculators on the web?
        • Re: retirement calculators
          AnnaLee
          hoppy said...



          Which seem to be the most reliable/functional calculators on the web?

          I like the way you asked the question. Projections of the future are always based on data from the past and are often cast in probabilities. It is good to understand how calculators work and what they assume. I hope you come back and explain better what you want to find out from a calculator. I can only tell you how I use the various calculators with a couple of examples of calculators that I like.

          FireCalc is a calculator that is described at http://www.firecalc.com/. The front page is informative and a good starting place. Look at the example in the graph on this page of the effect of the year you retire on the success of a retirement withdrawal plan. FireCalc uses actual stock market data to create the scenarios it uses. I use this calculator to keep down to earth since it includes the worst real data as well as the best.

          ORP, http://www.i-orp.com/, examines your sources of income and tries to project your optimal withdrawal and tells you what you will have available for spending during retirement (as opposed to you telling it what you need). It also tries to determine which investments you should tap and when to maximize your withdrawal (e.g. with respect to taxation). A good description of the good and bad of the calculator and deterministic models vs Monte Carlo methods in general can also be found at this site http://www.i-orp.com/modeldescription/MonteCarlo.html. I use this calculator to get a view of what my withdrawal would look like and what happens if I decide not to use my emergency fund (if you tell it about taxable money, it usually advises spending it). Instead of my telling it I want to spend, say, $50K/year. It tells me that by optimizing my withdrawals (and other inputs), it has determined that I have $55K/year I can spend. It has a Monte Carlo that can be run afterwards to determine the one and two standard deviations/worst case scenarios of the available spending rate.

          There are a variety of Monte Carlo calculators. I use FinancialEngines http://corp.financialengines.com/ but you might have not be able to use it. I have access through my employer but I heard that they now allow individuals to register and use their tools. ESPlanner is a commercial calculator tooted by Scott Burns. They have ESPlannerBasic online which is less powerful but free online. There are so many Monte Carlo based calculators that I am sure a web search will provide several alternatives. These calculators use different assumptions but most tend to take your data and an assumed withdrawal rate on your investments (or a withdrawal based on your desired yearly income) and tell you the likelihood that you will run out of money before you run out a need for that money. FinancialEngines examines your current net worth, savings rate, and investment strategy/risk levels to project your 95% success spending rate. You can change the inputs to generate different scenarios.

          With the exception of FinancialEngines, which has a good reputation, I tend to stay away from calculators at sites trying with a vested interest in getting me to over save for retirement but they are probably fine despite my prejudice.

          If these are not the type of calculators that you are looking for, let us know what you need. Also, the most calculators that ask for your asset distributions do not recognize CREF funds with no tickers. For CREF Stock, there are no tickered funds equivant to it's investment strategy but some others can be mimiced with equivalent tickered funds.

          • Re: retirement calculators
            hoppy
            Dear AnnaLee,
            Great suggestions! The ORP works well. The ESPBasic is weird, though: it suggests that we spend 400% of our current income this year! I've been back through it many times, and and can't figure out how it comes up with this bizarre result.
              • Re: retirement calculators
                AnnaLee
                That result is weird unless you have too much money. I wish I knew what might cause this but I really don't use it. I think I ran it once, maybe twice. The people at Scott Burns site might know what is wrong. Go to the forum: http://assetbuilder.com/forums/ , register and ask about the problem. I did a search for ESPlanner http://assetbuilder.com/search/SearchResults.aspx?q=ESPlanner and got several hits.
                  • Re: retirement calculators
                    hoppy
                    I only wish we had too much money! I thought perhaps it didn't like that our house is paid off, so I tried saying we had 1 more payment of 1$, but that didn't help. I'll try posting.
                      • Re: retirement calculators
                        AnnaLee

                        I hear you. I went to ESPBasic and ran some quick numbers. The same thing happened to me. It wants me to spend too much money but, in my case, I think it used my current income. You have to wonder about these guys that write this type of software. It takes my working gross income and seems to thinks I need to maintain it in retirement. Intially our pension and SS will be quite a bit greater than what we live on now because I save so much. I also noticed that ESPBasic does not seem to accept some critical inputs such as a COLA with a pension. Not too good for me at this point. My husband retired last August and I had to change his retirement age to next year to get it to accept his data