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As I approach retirement, I have utilized several free retirement calculators to help answer the question, “Can I retire?”. The exciting thing is they all seem to be confirming it’s okay for me to punch out when the time is right. Of course, like any model, these are only as good as the accuracy of the input and assumptions.
Below are the calculators I have used. Do you have any comments in general about these tools or have you used something you found useful that’s not on my list?
Fidelity Retirement Planner
Variable Percentage Withdrawal (VPW) Retirement Worksheet (created as a community effort by Bogleheads)
FI Calc
FIRECalc
Rich, Broke, or Dead? Post-retirement FIRE Calculator
I’m in my third year using Wealthtrace which they tout as more of a wealth tracking software than just financial planning or retirement planning. The Roth conversion tools were what got me to try them as that was the primary problem I was trying to solve for. I added New Retirement earlier this summer first to check the Roth results from Wealthtrace, but later to see the difference between the two. The Roth conversion tools in New Retirement were of little value for us because at this time I couldn’t choose which accounts you want to convert from and we exclusively want to convert my wifes IRA not mine at this time.
I do get comfort from the Monte Carlo analysis. I linked my brokerage to Wealthtrace to take advantage of how they use historical annual return and volatility for each holding (vs what appears to be user input and assumptions on other calculators). I will likely de-link changing my credentials and only link quarterly or semi-annually and then de-link to reduce the risk of theft and exposure as my portfolio doesn’t change significantly.
Respectfully, have you genuinely found the ongoing time spent using these tools to have guided your decisions to your ultimate financial benefit or are you looking for a comfort factor, etc? I started in pretirement with running the typical inputs, understanding that anything can happen at any time or sequence in any direction and magnitude. Is 85% probability comfortable? 95%? Honestly, while we’re each responsible for our managing our money, I’m finding that you can start to drive yourself crazy planning things to death when ultimately, nobody knows the future. If it gets to the day when you need to take your gold dust with you to buy groceries, we’ve got a whole different level of problems and confidence level. Hopefully, we never see that happen.
“…have you genuinely found the ongoing time spent using these tools to have guided your decisions to your ultimate financial benefit or are you looking for a comfort factor…”
Does it matter? Aren’t both of those things good?
Yes, they are both good. I’m trying to understand if I’m missing out by not doing something similar on a regular basis as others indicated here. I’ve learned a great deal from this site and it’s helped guide me in many positive ways.
I know our annual expenses very well and check-in monthly to see where we are with overall assets. I retired in 2019 with a good confidence level over 96% with realistic input assumptions , knew our yearly income going forward and set sail. Shortly thereafter, we found ourselves investing over $100K to help a family member with severe health issues, experienced Covid and a large downfall in the markets, (insert crisis here), etc. Not a great way to start retirement. The asset pool took quite a hit. Didn’t see that sequence or magnitude of troubles in the crystal ball. Of course, I also did some of the things you really aren’t supposed to do as far as investing goes to try to stop the losses. Thankfully, over the past couple of years with a lot of time spent adjusting investments, we’ve experienced bountiful returns and are well ahead of where we started in 2019. Divine intervention, extremely good luck – call it what you will. Didn’t see this coming either but sure am glad it did. Not sure that scenario was in any of the 1,000 trials in the many Monte Carlo sim scenarios we ran. Still standing. Let’s see what today brings.
“…I’m trying to understand if I’m missing out by not doing something similar on a regular basis as others indicated here…”
Gotcha. I’m pre-retirement, so I don’t know how useful they are in retirement. I sleep better at night knowing if I were fired tomorrow, we would be okay. These tools help me know that.
As a frequent outsider here at HD, I agree with your thoughts. We used to call it analysis paralysis at work.
No matter what, get your income stream set – regardless of the sources – and everything else planned or not will and must fit into it.
I have looked at many many calculators. I used to use Empower and NewRetirement but then thought about security and also privacy. Then Schwab has a clause that they will make you whole in case of any theft from your account as long as you don’t hook your assets to an outside source so I stopped using the ones above and asked my account there be deleted.
So I look this over periodically and I like it for its simplicity but it doesn’t do everything either. Just my two cents.
https://www.calcxml.com/calculators/are-my-current-retirement-savings-sufficient?skn=253
Thank you, Michelle and Jim, for mentioning the guarantee, of which I was unaware. I checked — Fidelity has this too, but perhaps with more fine print:
“To be eligible for coverage under the Customer Protection Guarantee, you must frequently check your account information and promptly review correspondence, account statements, confirmations, and alerts as they are made available to you, but no later than 30 days after that information is posted to your account or delivered to you.”
Consequently, I’ll be accessing all of my Fidelity documents on schedule starting today.
Schwab offers a service for a one-time $300 fee to use one of their CFPs and professional software to build a plan, then update as needed.
Just in case some neophyte to the world of spreadsheets should happen to come upon this discussion I think it is important to include a comment about spreadsheets and probability.
The probability of any single spreadsheet, which projects over a 20+ year retirement period, actually being right is essentially zero. This is because the probabilities of individual assumptions must be multiplied together to get an overall probability for the spreadsheet as a whole for each year, and then those multiplied together for the total length of time to get an aggregate probability. Even if you think that each of your assumptions are 99% accurate when you multiply .99x itself enough times, the result approaches zero.
This is why a planning tool which use the Monte Carlo method can be more helpful in thinking about the future. Even these have limits, because they only have data on what happened in the past.
There is an guest article earlier this month on Kitces titled “Assessing Both Longevity AND Mortality Risk For More Effective Retirement Plans” by Justin Fitzpatrick, Ph.D., CFP, CFA, who is Chief Innovation Officer at Income Lab.
https://www.kitces.com/blog/retirement-planning-longevity-risk-management-mortality-retirement-planning-social-security-pension/
The article addresses the opposite of longevity risk which is mortality risk, or the risk of dying earlier than expected and leaving a surviving spouse with less income than expected. I have not used the Income Lab software but the topic of income and additional costs to wife should I predecease her is important in my planning.
Best, Bill
Bill, thanks very much for the tip. I enjoy Kitces articles and always learn from them.
The easiest “Retirement Calculator” is the 4% guideline. If you have 25 times your annual expenses without even considering Social Security, you have more than enough to retire, in my opinion.
I think one guru, maybe Bill Bernstein, suggests including SS by assuming it will cover half your expenses, so you really only need a nest egg 12.5 times annual expenses. I’m at about 20 times expenses and all the Retirement Calculators give me a green light.
I have been very happy modeling with “Flexible Retirement Planner”. It does Monte Carlo simulations and has a nice combination of graphical and numerical outputs. It also has a good amount of flexibility (must be the name!) without being overly complicated.
Matt, thanks for an interesting topic. I’ve tried a bunch of different calculators, and built a few of my own with Excel. In my CFP training we were given access to a pro version of Money Guide Pro. which is a tool used mostly by professionals. The tool I’ve used the most and subscribed to for a number of years is MaxiFi. It approaches the retirement funding question from a different direction. Most retirement tools tell you if you can afford retirement based on projected expenses, or when, or if, you will ever run out of money. MaxiFi is based on Modigliani Life-Cycle Consumption theory. Basically it takes your inputs and calculates your optimum spending amount. The tool defaults to very conservative assumptions, but you can adjust them as you see fit. Many folks seem to struggle with understanding the results, because they are looking for a yes/no answer to the question “Can I retire?”. Th tool doesn’t tell you that – it says what you can afford to spend based on the inputs and assumptions. If that amount is insufficient for your desired lifestyle, you need to make some changes. The tool can help you evaluate different scenarios and rapidly assess the impact.
When evaluating retirement projections, the question of assumptions always come up, be it portfolio returns, inflation, spending, or what have you. Any future projection requires assumptions; you can’t get around it. To me the key is understanding your assumptions, and their impact on your projections. Using conservative assumptions, and apply margins of safety, should give the user some confidence in the projection.
But we should also be aware of not being overly conservative. In my engineering career designing satellite systems, we used what called “stacks worst-case” assumptions. Basically, we assumed the worst case condition for the important parameters. If your design still met the requirements, you had strong confidence in it. Some thought our songs were too conservative, but our equipment had to operate in extreme environments, for long periods, with not chance of repair. I use this approach when analyzing our retirement plan.
Rick, I agree that the MaxiFi Pro version is just excellent. Very complete, accurate, good quick response to the rare question you may have. (Rare question b/c the software itself has pop-up explanations, videos, good documentation etc.) Costs about $149 for 1st year for the most complete version. About 20% less for subsequent years.
I have used it personally and have also run plans for a few friends and relatives. It has the power to answer all your questions about the effect of when you (and partner) take Social Security, life insurance needs, survivor benefits, effect of inheritance, Roth conversion planning, and full Fed and state income tax calculations (plus IRMAA, FICA, etc.). Do all the “what-if” calcs you need (effect of retiring, moving, etc.) in about 15 min each once you have it setup. And you can get 1-on-1 help to set it up also if you need it.
I have compared it with several other of the calculators mentioned and MaxiFi is much more complete, accurate and powerful.
Rick, given your experience, would you recommend MaxiFi? I have read about it for several years and wasn’t sure about subscribing. As you noted, it offers a different perspective. I understand the concept of consumption smoothing but I keep thinking that I often have ‘lumpy’ consumption more often than not.
Eileen, I like it very much, but it definitely provides a different approach. What I like about the approach is it gives a clear metric to compare various scenarios. Lots of financial planning decisions are confusing because it’s hard to judge the results of different choices. MaxiFi solves for the the lifetime consumption, or standard of living. All else being equal, it gives you a tangible result that you can compare. I don’t look at them as exact solutions, but I think the comparison is valid. I did the free 2 week trial years ago before I subscribed. I’m not sure if that is still available. One thing that was outstanding was the customer support. ON a few occasions I had questions and I emailed their support team. I always got a useful response, several times from Larry Kotlikoff. would be interested to hear your opinion if you choose to try it.
Hi Rick, well MaxiFi is having a Labor Day sale and I’ve just subscribed. I will let you know after I spend some time with the reports.
I find that exploring some of these other tools can be helpful, especially after reading thoughtful reviews like yours. I don’t want to become mired in rabbit holes of course, but digesting different approaches can be useful. Better than mindless TV. In addition to many sources mentioned in HD, I also follow Tom Canfield of nesteggcare.com. Tom offers clear explanations of his assumptions and spreadsheets.
Thanks for your comments.
Rob Berger did a video review back in Feb 2023 on Maxifi software and in the video Mr. Berger lists his pros and cons of the software that may be worth a watch-
https://www.youtube.com/watch?v=LBuN1upNCJs&ab_channel=RobBerger
Mr. Berger’s conclusion, based on my understanding, was that while the software did have some features he liked that Maxifi did not help him with the retirement decisions he was looking to answer.
I have read three books that were authored or co-authored by Dr. Kotlikoff who founded Maxifi – The Coming Generational Storm (2005), Get What’s Yours (2015) and Money Magic (2022) that I found to be useful reading in preparing for my retirement and my ongoing decisions in retirement. I really enjoy Dr. Kotlikoff’s writing and thinking but I also took enough economic courses decades ago in college for economics to be officially my minor so my reading preferences may be a poor recommendation for many.
Best, Bill
Bill, thanks. I’ve also read some of Dr. Kotlikoff’s books and many of his articles. His book Spend ’til The End explains the methodology behind consumption smoothing and how his software approaches it. Mr Berger’s cons are consistent with what I’ve seen and heard form others. It’s not an easy tool to use, or understand the results. You have to make some effort to get your head around the techniques and results. I was surprised that he called it a simple calculation, and commented on how long it took to run a Monte Carlo simulation. That told me he doesn’t understand the underlying calculations and how computationally intense the techniques are. The first comment under the video addressed the same observation. So I hesitate to recommend it if someone isn’t willing to put some time into it. I spent much of my career using complex engineering analytical and design tools, as well as creating some, so this is (weird as this may sound) fun to me.
I will be off to my public library this week to borrow a copy of Spend ’til the End. I read the sample from your above link and I expect to enjoy the read. Thanks
I’m a big believer in FIRECalc, despite it’s odd and clunky presentation. This puts your retirement savings/income/expenses through every possible historical time period, unlike the Monte Carlo simulations where it can be harder to tell what conditions they’re simulating to obtain success/failure. When I see a 100% success rate on FIRECalc but lower on a Monte Carlo, I wonder what type of unprecedented conditions the Monte Carlo must have dreamt of.
I think the real challenge is getting your expenses right, but that’s a risk all retirees face. If you’re seeing projected success across the board, you’ve put thought into your expenses, and you maintain some degree of flexibility, then go for it when your gut tells you it’s time.
…I think the real challenge is getting your expenses right…”
I concur, Brent. One thing that’s consistent in all these calculators is the high impact expenses have on the outcome. You can drop expenses by just a couple hundred a month and get a pretty big bump in your “success rate”. This tells me that spending flexibility is critical for retirees.
Matt, I agree with your assessment. Running a calculator gives you a sense of how sensitive your solution is to changes in an input, like spending. It helps demonstrate how robust your plan is, and what the margin of safety might be.
What am I spending before retirement, what of that amount will I definitely not spend in retirement? What added spending is guaranteed? Isn’t anything else based on assumptions and questionably reliable?
Retirement calculators don’t make assumptions about your spending. That’s up to you. You input how much you intend to spend and it tells you the likelihood of your money lasting to old age. The models make assumptions for things like inflation and investment performance. Some allow you to override their assumptions with anything you want.
Some tools give you a range of how much you can safely spend, including events like 50% market drops. If you’re comfortable with that range, you’re golden.
Exactly my point. My spending assumptions drive the whole process so what I may assume can make it all right or wrong.
Yup. It’s critical to know your expenses.
I didn’t use any calculators because I was afraid it would tell me I COULDN’T retire😉. Seriously, I just did back of the envelope estimates, and 8 years later, all is well.
the bankrate calculators are also good.
Yes I used Fidelity’s and found it helpful. But as others have pointed out it’s not so much about your assets and estimating a rate of return in different types of markets. The real issue I’ve found is having good information on your expenses. That and knowing how much you’re going to spend in retirement.
I’ve used NewRetirement (new name coming), which does a good job. The free version has most of the features of the paid version.
I’ve used Fidelity and Schwab. I prefer Schwab because you can easily see and vary the variables (inflation rate, taxes, rate of return, etc). Since I am very conservative I did a lot of pressure testing -higher inflation rate, lower rate of return, what happens if the market crashes tomorrow and stays there (decreased account values by 50% to simulate), spending higher than expected – I added a cushion of 20%.
Also be very careful with spending since it can vary so much. I looked back over a year to be sure to include major repairs, tax bills, better-than-usual vacation, etc. I still underestimated for this year (unexpected new car, daughter’s bat mitzvah, greater than typical health care costs, major plumbing work that will involve digging up the front yard.) I am very grateful for the very conservative estimates I made. I am still sleeping well – but only because of the pressure testing and large cushion.
I didn’t use one. I did use a fee for service planner for a one-off consultation before deciding I could afford the CCRC I moved to last year. I made him run the calculations with three different inflation assumptions.
What exactly do they tell you that gives you confidence they and your assumptions are reliable?
Not sure how to answer your question. If you’re questioning the assumptions used by each model, I can only say, that’s why I use five of them. If they’re all giving a similar answer, it’s probably a good indication of where I stand.
I was thinking more of what they did with your assumptions assuming they are driven by your input. Do they say how much income you can generate or withdrawal relative to your assumed spending for example?
I’d suggest you go and play with Firecalc. It’s not the most glossily presented but you need only 2 pieces of data at a simple level – what is your pot and what do you want to draw from it as gross income as well as timeframe you want to test.
For reference it says if you have a pot of approx $1.4m to draw $50k pa you would (just) make it over 30 years in all backtested scenarios.
You can, of course, add in SS and pension income.
If you believe you would be capable of cutting back on spend if your investments were really not looking healthy then you can maybe tolerate a higher than 0% failure rate.
Yes. They are all a little different. Digging into their methodology is beyond the scope of this discussion, but most use current portfolio size plus contributions, other income sources like SS and pensions, your estimated expenses, and your asset allocation. They tell you how likely it is you will run out of money if you live to a certain age. Most of them are ultra-conservative.
Hi Matt, the only other ones I have used are the Open Social Security one and the one from Dinkytown about taxes. Chris
I’ve also used Open SS, but I’m not familiar with Dinkytown. Have to take a look. Thanks.
Matt, Jonathan links to Dinkytown in the Financial Calculators section of the Retirement chapter in his Guide here.