Retirement Analyzer A retirement analyzer is a valuable retirement planning tool that enables investors to assess their financial health, specifically their probability of running out of money during retirement. It is best used as a guide in making decisions on saving, spending, and investing and should be revisited annually. The retirement analyzer at ifa.com/ra provides the tools to assess an investorâ€™s probability of portfolio survival. The retirement analyzer performs a Monte Carlo simulation which generates 10,000 individual scenarios. Each scenario is calculated using randomly selected annual returns from distributions based on the performance of historical data. The results of a Monte Carlo simulation are heavily dependent on the following specific inputs: 1. 2. 3. 4. 5. 6.
Beginning portfolio value The number of years for the projection Future cash flows (both deposits and withdrawals) Inflation rate to be applied to the cash flows The distribution of returns Investment strategy
Quite often, the results of an initial analysis will appear unsatisfactory. Several changes in assumptions can be made to improve the expected outcome, these include: 1. 2. 3. 4.
Save a larger percentage of salary Spend less in retirement Shorten years in retirement Take more risk during the working years
Published on Jun 1, 2015
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