Help understanding online retirement calculators

[Anonymous]

I'm trying to do this without using a financial planner.

I'm plugging total retirement savings, pension, and social security into an online retirement withdrawal calculator, and tell it how much I want to spend monthly. It says back to me "your savings will last 30 years" at that rate. But the chart shows our savings as not being spent out in 30 years. There's still over $1M left in year 30 on the chart.

Does anyone understand this? We're not looking to leave our children an inheritance other than a $2M house with no mortgage that will be more highly valued in 30 years. We want to enjoy spending our money now -- including plenty of it on them and on grandchildren when they arrive.

Do these models just assume that you want to leave an inheritance? And if so, then why do they say "your money will last X years?"

Thanks for your advice!

[Anonymous]

It’s telling you your money should last “at least” 30 years.

You don’t want a result that shows that you’re have zero money in 30 years. That means there’s a risk it won’t even last that long.

[Anonymous]

As you get into your last years of life, things will be much much more expensive with health costs including nursing care if it’s needed. The calculators assume a steady spend but that will not happen. Having principal left over is important

[Anonymous]

You definitely want money left at the end for nursing care. If you have spent it all and you need nursing care, Medicaid doesn’t allow you to keep a 2M house. The limit is around 1.1M. So you would have to sell it to pay for private care.

Also, run several different calculators. Firecalc ficalc cfireism are 3 I like.

[Anonymous]

Dying with zero is not the goal, unless you are confident in your knowledge about the date of your future death. And, if you don't care to leave anything to your survivors or to others.

Those calculators typically use Monte Carlo analyses to predict the probability of portfolio success, defined as not running out of money by a specified number of years in the future. Most people should use age 100 to be safe, although few people will make it that long in practice. Still, longevity is increasing over time, so you never know.

In any case, the results provided by these calculators depend entirely on the assumptions you give them. If you use overly optimistic or pessimistic, and consequently unrealistic, expected rates of return, rates for inflation, periodic or episodic withdrawal amounts, etc., you'll get unreliable results. Spending, for example, is usually not linear - it ebbs and flows with age, health, need for long-term care, and other factors.

The more inputs a calculator allows, and the more informed those inputs are, i.e., based on sensible forecasting models produced by knowledgeable sources, the more reliable the results can be. But, even then, they depend on predictions about the future and, to that extent, are always going to be to a certain extent a "best guess" rather than an ironclad guarantee.

[Anonymous]

Anonymous wrote:and tell it how much I want to spend monthly.

This is why you have remaining funds.

[Anonymous]

Anonymous wrote:You definitely want money left at the end for nursing care. If you have spent it all and you need nursing care, Medicaid doesn’t allow you to keep a 2M house. The limit is around 1.1M. So you would have to sell it to pay for private care.

Also, run several different calculators. Firecalc ficalc cfireism are 3 I like.

Thanks for these calculator recommendations!

Re Medicaid, I'm not trying to qualify for it. I'm assuming the house is my piggy bank if I need more money for nursing care, or an asset to leave the kids if I don't. (I'm saying "I" because my husband is significantly older.)

[Anonymous]

Does the calculator consider taxes on all this?
Work on minimizing taxes now. Tax laws may change ofcourse and probably not for the best.
I will not pay much in taxes in retirement as SS in minimum, the rest is in Roths and in investment accounts without RMD.

[Anonymous]

I used everything out there for a while and came to the conclusion that the free tools out there are helpful, but they really only answer the question if you have a enough to retire.

I recently started using Boldin. It is a subscription based tool but you can demo with partial functionality for 14 days or so.

In the Boldin tool, there are a lot of parameters you can bake into your modeling. Leaving money behind, tax rates, growth assumptions and taxes.

The one I am working through now is Roth conversions. This question hits on your question around taxes, taxable income, the timing of everything etc.

Their output is good. Lots of graphics, good user interface and they offer a lot of online support and classes.

[Anonymous]

Anonymous wrote:I'm trying to do this without using a financial planner.

I'm plugging total retirement savings, pension, and social security into an online retirement withdrawal calculator, and tell it how much I want to spend monthly. It says back to me "your savings will last 30 years" at that rate. But the chart shows our savings as not being spent out in 30 years. There's still over $1M left in year 30 on the chart.

Does anyone understand this? We're not looking to leave our children an inheritance other than a $2M house with no mortgage that will be more highly valued in 30 years. We want to enjoy spending our money now -- including plenty of it on them and on grandchildren when they arrive.

Do these models just assume that you want to leave an inheritance? And if so, then why do they say "your money will last X years?"

Thanks for your advice!

that means it will last "at least 30 years" per Monte Carlo model (like 95% probability of lasting 30 years based on input). the higher your spending input, higher your risk of running out of money in 30 years.

[Anonymous]

Anonymous wrote:I used everything out there for a while and came to the conclusion that the free tools out there are helpful, but they really only answer the question if you have a enough to retire.

I recently started using Boldin. It is a subscription based tool but you can demo with partial functionality for 14 days or so.

In the Boldin tool, there are a lot of parameters you can bake into your modeling. Leaving money behind, tax rates, growth assumptions and taxes.

The one I am working through now is Roth conversions. This question hits on your question around taxes, taxable income, the timing of everything etc.

Their output is good. Lots of graphics, good user interface and they offer a lot of online support and classes.

There are some good tools out there to try. Also check out Pralana. We’re trying projection lab.