Welcome to our Retirement Distribution Calculator! It’s an excellent tool for determining retirement distribution amounts and more. For more information on the calculator and retirement distributions, see our informative article below the calculator. Thanks!
Will Your Retirement Plan Support Your Targeted Annual Retirement Withdrawals?
You have a retirement plan. But will it adequately provide for your needs during retirement?
There are many variables at play here. How can you be sure you won’t have to live on beans and rice at 65?
Our Retirement Distribution Calculator is a powerful tool allowing you to calculate your annual withdrawal amount taking into account several important variables. Moreover, you can choose an alternative variable to solve for, making this one of the most flexible and useful calculators around.
Let’s learn a little more about retirement distributions . . . .
Variables that Affect Retirement Distributions
The Retirement Distribution Calculator uses the most important variables in determining if you’ll be able to withdraw appropriate amounts of money every year during retirement. Here are some explanations of each variable and what you can do to improve your results:
1. Savings at Retirement
In our experience, many people grossly underestimate how much money they’ll need in Phase III: The Strategic Income Phase. During this phase, you’ll start spending your retirement assets, preserving some retirement assets through ongoing management and preparing your final financial plan.
It’s easy to assume you’ll need a certain amount in your nest egg to be comfortable. $1,000,000 might sound great, but is it really enough to support you year after year? Use the calculator to find out.
Improve your retirement savings by
- starting a budget,
- finding funds with excellent track records, and
- automatically drafting the percentage of your income you need toward retirement.
2. Years in Retirement
Average life expectancy in the United States, according to a 2011 study, is 79 years. Life expectancy has risen over the years, and will probably continue to rise.
We recommend setting the life expectancy variable somewhere between 20 and 30 years. The higher the number the more conservative your plan and retirement distributions.
3. Annual Rate of Return
What can you expect as a rate of return? That’s a difficult question to answer. After all, there is no guarantee that the stock market will yield a certain return.
This is why it’s a good idea to diversify your investments. Instead of just investing in the stock market, try renting out real estate or start a side business. You’ll lower your risk and have a more stable retirement.
However, for the sake of your calculation, it’s a good idea to choose a conservative rate of return. The default 5 percent is a great starting place.
Remember, the price of goods and services rises with time. Inflation will eat into your portfolio and reduce your recommended retirement distributions.
Like the annual rate of return, future inflation can only be assumed. However, it’s an educated guess that inflation will hover around 3 to 4 percent well into the future.
5. Annual Withdrawal Amount
You can set up our calculator to use the annual withdrawal amount as a variable, allowing you to set how much you’d like to withdraw from investments every year during retirement. We recommend a 4 percent withdrawal rate.
This allows you to set your living standards in retirement, and see exactly what you need to do to achieve them.
Volatility and Your Portfolio
While our Retirement Distribution Calculator is an excellent tool to help you determine the soundness of your retirement plan, it doesn’t tell the whole story.
Volatility – a factor the calculator doesn’t account for – will affect your portfolio. Investments that have consistent returns produce more profits than those that significantly fluctuate year after year – even if their averages are identical.
By keeping this in mind, it will give you a better idea of how well your portfolio is expected to perform.
Every time you use this calculator, you’re confronting reality. Take responsibility in researching out your retirement needs!
By the way, you can also use this calculator to figure out your full retirement picture by adding to the result other retirement assets such as:
- social security,
- real estate rental income, and
- any other sources of income you have!
By starting early and sticking to the Three Phases of Wealth, you’ll build a foundation, accumulate wealth, and have several strategic income streams to depend on in retirement. Retirement portfolio distributions will only be one source!
If you have any questions, contact a Certified Financial Planner™ that can help you navigate the complexities of retirement distributions.
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