Comments on: Estimating Retirement Income Needs – A Waste of Time?

By: Abdul

Abdul — Sun, 20 Jun 2010 23:17:12 +0000

i have had a payment request in since march 1st for $15 and still am waiting for payment from bux.to.

By: terry

terry — Tue, 19 Aug 2008 17:57:04 +0000

For a retirement income of $50K PER MONTH the numbers are plausible.

By: Steve Selengut

Steve Selengut — Fri, 15 Aug 2008 15:49:45 +0000

This is really inaccurate analysis. In today’s environment $50,000 could be generated from less than a million bucks, with funds left over for reinvestment.

Check my many articles on investing for income.

Steve S

By: Sean

Sean — Thu, 14 Aug 2008 21:53:46 +0000

I’m pretty sure she’s just inventing numbers for comic effect.

From the article: “Someone who has saved a million dollars by age 38 should be congratulated for being able to live off $50,000 a year in 20 years, with enough left over to buy a car?”

The math here is obviously wrong, since someone with $1,000,000 who could live off $50k/yr could essentially retire immediately. A 4-5% withdrawal rate is usually considered pretty safe.

By: Sam

Sam — Wed, 13 Aug 2008 20:35:01 +0000

Miguel,
I saw a presentation from a financial planner who had put together a probability-based retirement planning spreadsheet that used Monte Carlo simulation. This was at a Crystal Ball user’s conference (Crystal Ball is a software program that integrates with Excel and enables you to put probability distributions into individual cells and run Monte Carlo simulations.)

He had a pretty slick setup that used probability distributions for things like expected return from stocks and bonds, inflation rate, and so on. After seeing that, I’m not impressed with most retirement calculators I run across. Of course, he was charging big bux to put your numbers into his program, but he was able to say things like “this investment program will have a 95% probability of meeting your retirement income needs”.

By: Miguel

Miguel — Wed, 13 Aug 2008 15:45:23 +0000

I’ve played around with creating my own ret calculator in Excel (based on ripping off the model my fin’l planner uses). In messing around with the variables, one thing becomes abundantly clear: I will either die penniless or obsenely wealthy depending on some very small variances in assumptions for inflation, returns, taxes, withdrawl rates, etc. What that tells me is that Monte Carlo simulation is probably the best way to appraoch the question, so that you get confidence intervals taking into account all the possible scenarios. I haven’t figured out how to do that in Excel yet.

At any rate, what I really think is that the key to a successful retirement is creating balance, flexibility, and safety nets. I think you will need a mix of income sources & invmnts, some cash reserves, some insurance, etc. And you will need a good enough mix so that a disappointment or shortfall in one area can be made up with adjustments in another. In addition, non-monetary issues like family situation, community resources, etc. play a big role. Who might be dependent on you, and who might you be able to depend on, will greatly impact your resources or lackthereof.

I think the “looming retirement crisis” is somewhat overblown. While it is true that many, many boomers are little prepared, I think the bottom-line is that people will have to work longer than they think, live at a lower standard than they think, and ultimately shift the burden to their family/children.

For better or worse, I think most people (that being those people who do not read AFM) subconsciously figure their [adult] kids will be their ultimate retirement vehicle if all else fails. I see it over and over again – its the 2 ton elephant in the room that most PF writers don’t talk much about. When people say they are not going to worry about it… [fill in the blank: "the lord will provide, I'll manage somehow, its too depressing and I can't think about it, thats why I play the lottery, maybe I'll get an inheritance, etc".] what they really mean is that “I will probably become a burden to my children who will have to jepordize their own financial futures because I did not take care of my own though I would never actually allow such a harsh reality thought to enter my thick skull”.

By: Beth

Beth — Wed, 13 Aug 2008 12:09:58 +0000

I agree that you just need to save what you can and don’t worry about it. Life’s too short as it is and there are too many things to worry about already. Besides, by the time I retire, the retirement age will be 80-something. (I’m guessing, but with the way things go, I wouldn’t be surprised if I’m still working well into my 70s.)

By: agriya

agriya — Wed, 13 Aug 2008 07:52:47 +0000

yes, I agree the post, people who are not having awareness about retirement life they have to be careful, retirement income is very important that time we couldn’t able to do lots of work for earn money, that time some people having some health problem also we need money to meet these all, so be careful to plan about your retirement income

By: Sam

Sam — Wed, 13 Aug 2008 04:54:05 +0000

I practice David Back’s concept from his book Automatic Millionaire. In it he says in order to retire comfortably or a millionaire by the time you reach your retirement age, you need to automatically deduct a certain percentage from your monthly salary (10%-20%) straight to your retirement fund. These retirement fund can be invested in a mutual fund and hopefully, thanks to compounding you’ll reach more than a million by the time you’re 60 or above.

The key here is “automatic”, you may want to inform your accountant do automatically deduct it from your salary and transfer it your retirement fund. You know the saying, you don’t spend what you can’t see.

Sam
Fix My Personal Finance
http://fixmypersonalfinance.com/

By: Heidi

Heidi — Wed, 13 Aug 2008 00:33:05 +0000

I used the metlife retirement age calculator and it told me that I should start to taking social security when I’m 78 (but the calculator really isn’t designed for me – the lowest age it will let you enter is 40).

I agree with Jeremy and JLP – these calculators aren’t useless. They get people thinking about retirement income needs, and they also serve as a tool that drives conversations (and business) to financial professionals.

In my experience, career agents, wholesalers, advisors, and financial planners all love these things because most complex financial products cannot be sold online – you have to actually talk to someone. These calculators serve as door openers.