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 price of a movie ticket in today's COVID-19 world. It costs 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

What is the difference between a gold and silver IRA?

You can make investments in precious metals (such as gold or silver) without having to pay tax. This makes them an attractive investment for people who want to diversify their portfolios.

You do not have to pay income tax on interest earned from these accounts if you are over 59 1/2. On any appreciation in value of the account, you don't have to pay capital gain tax. There are limits on the amount of money that you can place into this account. Minimum amount allowed is $10,000 If you're under the age of 59 1/2, investing is not allowed. Maximum annual contribution: $5,500

You may not receive the entire amount if you pass away before retirement. After all expenses have been paid, your estate must contain enough assets to cover any remaining balance in your account.

While some banks offer gold and/or silver IRA options to their customers, others require them to open a regular brokerage bank account that allows you to purchase certificates or shares.

Are gold and Silver IRAs a good idea or a bad idea?

If you are looking for an easy way to invest in both gold and silver at once, then this could be an excellent option for you. There are other options as well. You can contact us at any time with questions about these types investments. We are always available to assist you!

Is it possible to make money with a gold IRA.

You must first understand the market and then know which products are available to make money.

If you don't know, you shouldn't start trading until you are sure you have enough information to trade successfully.

Find a broker that offers the best service to your account type.

You can choose from a variety of accounts, including Roth IRAs or standard IRAs.

If you have any other investments such stocks or bonds, you may want to consider a rollover.


  • SEP-IRA”Simplified employee pension” For self-employed people like independent contractors, freelancers, and small-business ownersSame tax rules as traditional IRASEP IRA contributions in 2022 are limited to 25% of compensation or $66,000, whichever is less4. (
  • Depending on your financial situation, most experts recommend you invest no more than 5% to 10% of your retirement funds in precious metals. (
  • 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. (
  • The maximum yearly contribution to an individual's IRAs is currently $6,000 ($7,000 for those 50 years or older), or 100% of earned income, whichever is less. (

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How To

How to change your IRA to a gold IRA

Do you want to change your retirement savings away from a traditional IRA and into a golden IRA? Well, this article will help you do just that. Here are some tips to help you switch.

“Rolling over” refers to the act of transferring money into an alternative type of IRA (traditional), or vice versa (gold). Rolling over an IRA account can provide tax advantages. In addition, some people prefer investing in physical assets like precious metals.

There are two types IRAs – Traditional IRAs and Roth IRAs. The difference between these two accounts is simple: Traditional IRAs allow investors to deduct taxes when they withdraw their earnings, while Roth IRAs don't. If you invest $5,000 in a Traditional IRA now, then you'll be able only to withdraw $4,000. You would still be able to keep all your money if you had the same amount invested in a Roth IRA.

This is what you need to know if you want to convert an IRA from a conventional to a IRA to a IRA with gold.

First, decide whether to transfer funds from an old account to your new account or to rollover your current balance. When transferring money, you'll pay income tax at your regular rate on any earnings that exceed $10,000. But if you choose to roll over your IRA, you won't be taxed on those earnings until you reach age 59 1/2.

After making your decision, you can open a new financial account. Most likely, you will need to present proof of identity such as a Social Security Card, passport, or birth certificate. After that, you'll need to sign paperwork proving you own an IRA. Once you have completed all the forms, you will submit them to bank. You'll be verified and given instructions on where you can send your wire transfers and checks.

Now comes the fun part. After you have received approval from the IRS, you will deposit cash to your new account. You will be notified by mail that your request has been approved.

That's it! You can now relax and watch your money grow. You can also close your IRA and transfer the balance to a new one if you change your mind.


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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