LATEST SPREADSHEET CORNER ARTICLE:
Retirement Withdrawal Calculator
January 17, 2015
Throughout the years, there has been much discussion regarding an optimal retirement withdrawal rate. A withdrawal rate is a function of how much money you withdraw from your retirement fund each year. I’m sure many of you have heard of the oh-so-popular 4% withdrawal rate standard. Some experts have suggested a lower rate given low bond yields, while others have suggested a variable rate that gives retirees more flexibility depending on market conditions. Many assert that investors are better off choosing a first-year retirement withdrawal percentage and then growing the withdrawal amount each year to keep pace with inflation. However, this can be tricky. What if you choose the wrong initial rate? If you choose a rate that is too high, you face possible shortfall risk (the risk of running out of money within your lifetime). If you choose a rate that is too low, you might not be taking full advantage of your retirement savings.
Instead of focusing on a specific withdrawal rate to use throughout retirement, you could calculate how much you can afford to withdraw annually in retirement based on the amount of money you want to have left over for your estate, how many years you estimate you will be in retirement and estimated inflation and rate of return. CI’s Retirement Withdrawal Calculator does just this.
Would you want to maintain your current lifestyle in retirement? Would you be able to? Or would you want to, or have to, live off of less per year? These types of questions should constantly be asked in order to properly plan for living in retirement. Selecting a withdrawal rate doesn’t need to be set in stone, but the planning is important. There will always be uncertainties within the stock, fund and bond markets; modifications to your retirement withdrawal plan are often necessary based on current market environments.
Typically the annual inflation rate can be estimated by using the consumer price index Bureau of Labor Statistics. An inflation measure is important because this is the percentage amount that your buying power will decrease by each year. As your purchasing power declines, it will take more money to buy the same amount of goods. Retirement plans are typically long-term, so adjusting for inflation is vital.percentage. CPI measures changes in the price level of a market basket of consumer goods and services purchased by households. CPI information is published by the
A look at the fundamental changes that have taken place with Office 2013 and some new features offered in Excel 2013.