Monte Carlo Retirement Calculator
How much money do I need to retire?
This retirement calculator runs simulations based on past data from the S&P 500, 10 Year Treasury Bond, 3 month T-Bill, and US inflation. For each year of each simulation, a random return and inflation amount is chosen.
How to use: Enter your current age and the age when you retire. Then enter your current savings, the amount that you can save annually before you retire, and the amount that you plan to withdraw after retirement. Your annual deposits and withdrawals take inflation into account. For example, if you need $50,000 to live on in retirement using today's dollars, we will automatically take into account the cost of living for your retirement years. The same is true for your annual deposits. Next, decide if you'd like to simulate a stock market crash.
Portfolio Section:
In the portfolio section, choose the makeup of your portfolio with stocks, bonds, and cash. Cash assumes that your money is stored in a savings account. You can then alter the future returns and inflation. For example, if the market has historically returned about 10%, but you think the future will be worse, modify the stock returns by -3%, and the future returns will average out to 7%. Investment fees can also lower stock market returns. Many index funds and ETFs offer extremely low fees and expenses.
Additional Income:
Many people receive income in retirement, such as social security, pension plans, part time jobs, annuities, and other benefits. This would allow you to take out smaller distributions every year. Please note that taxes must also be considered, but are not used in this simulation. A 401k, Roth IRA, and Traditional IRA are taxed differently than a standard investment account, as are dividends.
Note: This assumes that the future is at least somewhat like the past. In reality, anything could happen. The Soviet Union collapsed, Japan's Nikkei Index is still well below its 1989 peak. Numerous other markets have changed drastically and never recovered. However, this online tool is helpful in retirement planning and estimating how much you might need for retirement, especially those hoping to retire early. We recommend receiving advice from a financial planner.
WHAT YOU NEED TO DO: Read the above description of the RETIREMENT CALCULATOR. If you would rather switch the the more simple calculator that is fine. Use the Calculator to figure out an amount that you will need to have to live on after you retire. Try to consider all factors, but also look for the best case scenario the system of saving that will work best for you and provide for your needs.
Some factors to consider are: Consider making changes to your lifestyle when you retire; no kids, smaller home, travel? How will your lifestyle change when you retire? You should run the lifestyle calculator considering these changes. What age do you want to retire at? Early? Never? When considering these factors use the calculator to help you determine how much you should save and when you should start saving so you can retire on your own terms.
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