How To Calculate Your Retirement Number

Most people think of your retirement amount when they refer to how much money they need to retire comfortably. It can be comforting to have a retirement number. This gives you a goal that is concrete and achievable. Is there a single definitive figure that is truly useful in retirement planning?

Although we would love to answer "yes", it could be too simplistic. It is too easy to identify the perfect retirement number, at least for most people. Because it is so easy, the retirement-number idea was popular. It's easy to just plug in a number and move on to the golden years.

It's not always that easy, sorry. Investors need to be able to comprehend the more complex nature of retirement.

Stuff Happens

Unexpected events are part of life, and this will not change as you age. If you retire at 65, you can expect to spend as much as 20 years in retirement. Imagine how much things could change in a span of just two to three decades.

The first Harry Potter movie was released in 2001, two decades ago. To see it in theaters would have been $5.65. The average U.S. ticket cost was $4.21 in 1991, which is 30 years ago. This is more than twice the average movie ticket price today, which is around $9.50 per movie.

There are many other factors to take into consideration, beyond inflation. Let's suppose you have $1 million to retire. It doesn't matter if the stock market crashes the day after retirement or rises for the first ten years of retirement, your retirement experience will be very different. Your financial security outlook could also be affected by family problems and health issues. Your plan could be thrown off track by overspending in the first years of retirement.

These are excellent examples of how the simplified retirement number can be misleading and even dangerous for your financial security. It is necessary to be more realistic.

Introducing Monte Carlo

Monte Carlo simulations, which are mathematically-based analyses, attempt to make sense of ambiguity or random variables. This is how you will retire.

Retirement planning can seem simple and straightforward because there is no formula. Monte Carlo simulations are a great way to get the nuance you need to make your retirement plan work.

These simulations analyze thousands of possible retirement scenarios and use details that are based on your current situation to help you determine your chances of success.

Let's take, for example, the scenario where you plan to retire at 65 and want to continue your lifestyle throughout your life. You want to do this using assets that you already have.

Monte Carlo simulations will simulate thousands of market scenarios. This allows you to see what the market might look like if it crashes or roars shortly after retirement. It also combines these market options with your planned and desired cash flows. Personal Capital's Monte Carlo software uses 5,000 scenarios. In the end, you will receive a probability-of-success ranking of low, medium, or high.

This simplified version is available for you to try.

It is up to each of you to decide what the next step should be. Your financial advisor and you can pull many different levers to help make your situation more likely to succeed. You may find that you have a moderate chance of reaching your retirement goals. You can increase your chances of success by:

  • Do not delay your retirement
  • Every year, save more before you retire
  • Your retirement savings should be reduced
  • In the hope of higher returns, adjust your investment strategy and risk profile

You can pull all or some of these levers to increase your chances that your investments will sustain you through retirement. You can either stick to your plan or be flexible and admit that you may need to make some adjustments. You could take actions like:

  • In retirement, downsizing your lifestyle
  • Part-time work
  • Moving in with your family

Your personal flexibility and comfort level will determine the choices you make.

How can you simulate Monte Carlo on your retirement portfolio?

It's easy, secure, and free to do by signing-up for Personal Capital's financial tools. You'll have access to the Retirement Planner within your Dashboard. This will allow you run a Monte Carlo simulation using your portfolio and other financial events (such as a home purchase or when you plan on taking Social Security).

These robust financial tools combine all your financial information in one secure place. This allows you track your net worth and budget for your short-term goals. It also lets you analyze your investments.

It is completely free and takes only a few moments. It's not like seeing Harry Potter at the theatre.

Planning for retirement is an ongoing process

Monte Carlo planning, as you might have guessed is never finished. Your actual life situation is not static, unlike a fixed retirement number. Your chances of reaching your retirement goals change constantly.

Inflation is one potential risk for retirees. Monte Carlo simulations are a great way to monitor the effects of inflation if it becomes a major factor.

Nobody can predict the future. Not even the best Monte Carlo simulations. A mathematics-based approach to retirement planning is a good starting point. It is important to fully understand your situation, and work towards improving it.

Monte Carlo simulations will ensure that you don't hit the retirement button and check out. You'll feel more in control, as you will be constantly evaluating the effects of new information and adapting as necessary.

7 Essential Steps to Retirement Planning

Here's our take on your retirement number

You are not a number. You shouldn't treat retirement planning as a number. You may need guidance if you are looking to create a retirement plan that is based on your financial reality and adapt as your life changes.

  1. Register for Personal Capital's financial tools to access the Retirement Planner, an extensive retirement planner that will help plan for multiple scenarios.
  2. You should review your retirement plan at least once a year to make any necessary adjustments.
  3. Talk to a fiduciary advisor.

Frequently Asked Questions

Are precious-metal IRAs a good option?

How willing you are to risk your IRA account losing value will decide the answer. They make sense if you have $10,000 in cash as long as you don't expect them to grow very quickly. These might not be the best options if you're looking to invest in assets that have the potential to rise in value (gold) and plan to save for retirement for many decades. You may also have to pay fees, which can reduce your gains.

Are you able to keep precious metals in your IRA?

This depends on the IRA's owner's desire to diversify or keep his holdings in silver and gold.

Two options are available for him if diversification is something he desires. He could either buy bars of physical gold and/or sterling from a dealer or simply sell these items back at the end. However, suppose he isn't interested in selling back his precious metal investments. In that case, he should continue holding onto them as they would be perfectly suitable for storing within an IRA account.

What is a Precious Metal IRA, and how can you get one?

Precious Metals are a great way to invest in retirement funds. Precious metals have been around since Biblical times and still hold their value today. The best way to protect yourself from inflation is to invest in precious metallics such as platinum, silver and gold.

Certain countries permit citizens to hold their money in foreign currencies. You can buy gold bars in Canada and keep them at home. Then, when you go back to visit family, you can sell those same gold bars for Canadian dollars.

This is a great way to invest in precious metals. It is particularly useful for those who live outside North America.


  • To qualify as IRA allowable precious metals and be accepted by STRATA, the following minimum fineness requirements must be met: Gold must be 99.5% pure, silver must be 99.9% pure, and platinum and palladium must both be 99.95% pure. (
  • You can only purchase gold bars of at least 99.5% purity. (
  • The IRS also allows American Eagle coins, even though they do not meet gold's 99.5% purity standard. (
  • Silver must be 99.9% pure • (

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How To

How to determine if a Gold IRA works for you

Individual Retirement Accounts (IRA) are the most popular type. IRAs are available through employers, banks, mutual funds, and financial planners. The IRS allows individuals to contribute up to $5,000 annually without tax consequences. This amount can be contributed to any IRA, regardless of your age. There are limits to how much money you may put into certain IRAs. For example, if your age is less than 591/2 years old, you can't contribute to a Roth IRA. Contributions must be made by those under 50 years old. Some employees may be eligible to match contributions from their employer.

There are two types: Roth and Traditional IRAs. Traditional IRAs allow you to invest in stocks, bonds and other investments. A Roth IRA allows you to only invest in after-tax dollars. Contributions to a Roth IRA aren't taxed when they come out, but withdrawals taken from a Roth IRA are taxed once again. A combination of both accounts may be preferred by some people. Each type has its advantages and disadvantages. What should you look at before deciding which type is best for you? Below are three important things to keep your mind on:

Traditional IRA Pros

  • Companies have different options when it comes to contribution options
  • Employer match possible
  • Save more than $5,000 per Person
  • Tax-deferred growth until withdrawal
  • There may be restrictions based upon income level
  • The maximum annual contribution limit is $5.500 (or $6.500 if married filing jointly).
  • The minimum investment is 1000
  • You must start receiving mandatory distributions after age 70 1/2
  • You must be at the least five years of age to open an IRA
  • Cannot transfer assets between IRAs

Roth IRA Pros:

  • Contributions are exempt from taxes
  • Earnings grow without paying taxes
  • There are no minimum distribution requirements
  • There are only a few investment options available: stocks, bonds and mutual funds.
  • There is no maximum contribution limit
  • There are no restrictions on the transfer of assets between IRAs
  • An IRA can only be opened by those 55 and older

When opening a new IRA it's important to realize that not all companies offer identical IRAs. Some companies offer the option of a Roth IRA, while others provide a choice between a Roth IRA and a traditional IRA. Others offer the possibility to combine them. There are different requirements for different types. Roth IRAs do not require a minimum amount of investment, while traditional IRAs are limited to a maximum investment of $1,000.

The bottom line

When you are choosing an IRA, it is crucial to consider whether you will pay taxes now or in the future. A traditional IRA may be the right choice if you retire within ten years. If you are not able to retire within ten years, a Roth IRA may work better for you. It doesn't matter what, it is a good idea consult a professional to discuss your retirement plans. A professional can help you determine the best option for your situation and keep track of what's going on in the market.


By: Paul Deer, CFP®
Title: How To Calculate Your Retirement Number
Sourced From:
Published Date: Wed, 04 Jan 2023 20:00:33 +0000

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