Ask Terry Questions Need a retirement withdrawal calculator

Need a retirement withdrawal calculator

By Terry Savage on April 27, 2013 | Financial Planning / Retirement

Terry: I am 65 years old (soon to be 66 in a couple of months) and would like to retire at 67. I have accumulated $2.2M in various accounts for retirement (14% Cash, 32% Bonds, 48% Equities, 6% Other) with $1.3M of the $2.2M in IRA’s or 401K. We have no credit card debt and only a mortgage. Ideally, We would need $150k (inclusive of taxes) a year for retirement. I’ve used a number of the retirement calculators, but am uncertain (more bewildered) as to how this retirement amount converts into $150k/year — if at all. Any advice on how to determine if I can retire at 67. Signed: Getting close, but don’t know how close

SAVAGE SAYS: Well, first — congratulations!? You’ve done a wonderful job of saving. And now you’re ready for some very sophisticated help in the form of “Monte Carlo Modeling.”? And no, it has nothing to do with casinos!? Actually, it is a very complex process of modeling multiple variables (range of returns for different asset classes) and multiple withdrawal scenarios, to come out with the best likelihood that your money will last your lifetime (or that you can leave some to your heirs if that is your goal).

This is not a “do-it-yourself” project. You need to go to a financial professional who uses this computerized modeling process. My favorite place to do this is through T. Rowe Price, the investment and mutual fund company. They have a process called Retirement Income Modeling, which uses Monte Carlo modeling. You don’t have to have money in their funds (all no-load, no-commission), but if you do they waive the one-time cost of $500. They will give you advice on how to invest, how much to withdraw, to come closest to certainty of meeting your retirement goals. You work with an individual planner and this is not just an online calculator, but requires some discussion. Call them at 800-638-5660. Do it, and then please write back and tell me about your experience!

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