Retirement Income for Life – Retirement Calculators
As a Do-It-Yourself (DIY) investor who works off his own financial plan to achieve financial freedom, I’m always drawn to a various (read in: free!) calculators that can help investors like you and me tailor our own plans.
Given we spend multiple decades striving to accumulate assets so we can enjoy a few decades of good health in retirement or semi-retirement, it is increasingly surprising (although not shocking to me) that there are very few, great retirement calculators out there. One would think, if you design a great tool and offer a service that accompanies such tools to help investors – DIY or otherwise – that might become a proverbial cash cow for you as an entrepreneur given the demand for would-be retirees to figure out their “enough number”.
I have an idea of what our “enough number” might be, and we’ve been working towards that goal for many years now.
Your mileage might vary but do read on!
1. Help for your “enough number”
“Drawing down one’s savings in retirement is something very few retirees do well, even with the help of professional advisors.” – Fred Vettese, Retirement Income for Life.
I’ve been a long-time fan of Fred Vettese, retirement expert, author, chief actuary at Morneau Shepell, and more.
I provided some book reviews of Fred’s books as part of these giveaways in the past on my site here:
Here are some of my favourite takeaways from each book in no random order:
“Spending in retirement falls into three categories or “buckets”: regular spending, rainy day spending and bequests.”
“The inescapable conclusion is that you have to invest in stocks if you want a decent return over the long run. There is no guarantee you will get it, but your odds are better than with any other asset class.”
Vettese on a “safe” withdrawal rule of 4% or 5%: “The real problem with a flat percentage withdrawal is that the income it produces does not reflect your actual needs.”
On Vettese’s top 3 ways to optimize asset decumulation for your retirement:
- Invest in passively managed funds to lower your investment costs and fees over time – keeping more of money working for you (versus in the hands of advisors of financial companies).
- Start your Canada Pension Plan (CPP) later in life – something I wrote about here.
- Use some (not all), maybe between 25-50% or so of your RRIF assets to purchase a non-indexed annuity.
Vettese on our prolonged, low-interest rate environment for investing: lower your portfolio’s projected investment returns in the coming decades AND also increase your equity to bond asset mix.
2. Help for your cash flow income targets
With thousands of people including many Boomers hitting retirement age every day, entering this decumulation phase of their lives, they will need to have sound strategies to draw down their savings to create retirement income for their lives (and maybe a bit more) depending upon any estate plans.
(I’ve got this calculator and many other FREE calculators related to personal finance listed on my “Helpful Sites” page here.)
The premise of the Morneau Shepell calculator helps determine, for anyone over age 50 who might be heavily relying upon their retirement savings for income security, to determine their projected income target range.
I thought it would be interesting to input some fictional data to see where we might be at age 50 – assuming everything goes according to plan:
We’re not quite age 50 (a handful of more years yet!) but it’s assuring to see we’re a good path. This is primarily because of our plan to max out our TFSAs this year and every year (you can read about the tremendous wealth-building value of the TFSA here),
striving to maximize contributions to our RRSPs every year as well.
Is this calculator perfect? No. There are some major assumptions involved in this tool. For one, I would like to see more details about inflation myself and a sliding scale to see the impact inflation has on income purchasing power over time.
Furthermore, this calculator might also not take into consideration many other factors that could help you determine a higher income “enough number” including Old Age Security (OAS) benefits among other income streams.
This tool however is very FREE (I just tried it again the other day…) and it does provide you with a ballpark projection for your retirement income estimates to hone further planning details.
Have you seen this tool? What other tools might you use for retirement planning? Are they free? If so, tell me about them and I might write about them in order to share those resources with others!
You can see some of my favourites from my Helpful Sites page below:
Planswell has a good, free tool here (no affliation) about borrowing, investing and insurance.
I like this Vanguard tool that runs 100,000 monte carlo simulations about your retirement nest egg success here.
Have you heard of the The Money-Ready App? Registration is free and the free trial allows you to explore features.