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I remember I checked several times in the past years and they gave me what I would have by the time I retire and its been constant... Now, I checked again and it is 1/3 of the value from the previous years... did I do something wrong or did the calculators suddenly used a different algorithm...
they may and should be changing. times have changed , the new norm may have changed and 100 years of history may have gone out the window if the downturn for stocks and no to low interest rates keep persisting..
according to ibbotsen research if you took 100 years of stock market and bond history and were 60 years old many financial calculators would tell you if you saved 500k by age 60 that by retirement at 70 you would have about 1 million dollars if you had a 50/50 mix of bonds and stocks.
you could buy an annuity at todays rates under normal circumstances that would pay you 87k a year for life.
well as reality played out if you had that 500k in 2000 at 60 and were retiring today you would have just a tad above the 500k you started with , not the 1 million history and the calculators says you should have had. . buying that same annuity today would pay you 39k a year.
is that scarey or what. thats a huge pay cut.
we have lived that 10% failure rate that these calculators tell you could happen.
no everyone wont be buying an annuity but i used that as an example because they pay you more than you can get on your own and therefore represent the most you would get to live on unless you took on alot of additional risk..
i saw one financial planner who has changed from whatever calculator he was using to just telling clients to just figure zero return after inflation and taxes as a conservative precaution going forward. .
Last edited by mathjak107; 01-07-2012 at 12:50 PM..
Unable to tell what happened with your retirement calculator, but, unfortunately, several traditional retirement metrics seem to have pretty much fallen by the wayside over the past few years:
1). The notion of protecting one's principle throughout retirement by withdrawing 4% anually
2). Considering home equity as a positive part of one's estate; ... or the notion of downsizing the 'family home' in retirement to create supplimental 'wealth'
3). The 'buy and hold' strategy of indefinitely holding equities (or property) - to provide a reasonably secure retirement
4). The assumption that one will remain steadily employed and/or maintain a predictable income growth rate throughout their career ... until retirement.
5). Planning on today's level of healthcare (Medicare/Medicaid) and Social Security; ... or the expectation that one will find a career position with a pension.
6). The idea that one's "retirement $number" will remain about the same ... until they retire.
There are probably a number of other long-term changes that are going to force a change of retirement thinking ... and a re-programming of retirement calculators.
The retirement calculator's are still out there you just have to kill the rosy assumptions about year-to-year salary growth, 401K earnings and so on. Uncorrected for reality, mine says I will have 110% of my base income when I retire but not factored in was the -0.04% my 401K earned last year.
many retiremnt calculators use rolling 30 year periods of time to see how retires did over that time frame. . they then assign a pass or fail grade or a percentage of success.
the results depend more on the order of the gains and losses coming in then the actual return.
the last full set of data they have is for those that retired 30 years ago .everyone else is a partial and know one knows yet how they will do full term.. alot has has changed the last 12 years to make a successful retirement alot harder to pull off using conventional investments.
the new norm we have been seeing so far has made these calculators not very accurate.
could things go back to more normal 7-8% gains for a 50/50 mix and being up 2/3 of the time and down 1/3? perhaps but i just dont think we will resume that trend as an eductated guess for at least 5-10 years .
Last edited by mathjak107; 01-12-2012 at 03:11 AM..
many retiremnt calculators use rolling 30 year periods of time to see how retires did over that time frame. . they then assign a pass or fail grade or a percentage of success.
the results depend more on the order of the gains and losses coming in then the actual return.
the last full set of data they have is for those that retired 30 years ago .everyone else is a partial and know one knows yet how they will do full term.. alot has has changed the last 12 years to make a successful retirement alot harder to pull off using conventional investments.
the new norm we have been seeing so far has made these calculators not very accurate.
could things go back to more normal 7-8% gains for a 50/50 mix and being up 2/3 of the time and down 1/3? perhaps but i just dont think we will resume that trend as an eductated guess for at least 5-10 years .
Mathjak, I'm wondering how retirees from various decades/generations have comparatively fared (?) Are there sets of data available that provide a comparative metric... perhaps in 'then dollars' vs 'today dollars'? -- Thanks, you always seem to be able to come up with meaningful financial data.
well calculators like firecalc work with decades of history and use 30 year rolling periods of time to exemplify each group of retirees.
overall through history each 30 year period survived fairly well with mixes ranging from 50/50 to 70/30 and a 4% inflation adjusted withdrawl..
but then a new range of data cropped into the mix about 12 years ago that has a pattern and returns that got recent retirees off on a bad start. time will tell if we revert back to normal .
my opinion is for at least the next 5 years and maybe as much as another 10 i think this new norm will stay with us setting un-precedented patters and returns blowing 100 years of historical returns
and data right out of the window and these financial calulators with them. thats just my opinion , as if we have 17-22 years of mediocre returns ,low interest and un-favorable patterns of gains and losses the first group of retirees under the new normal may be adjusting the withdrawls way down from 4% which many maybe should have done already..
Last edited by mathjak107; 01-14-2012 at 11:58 AM..
I stopped contributing into the 403b plans offered by my employer right before Lehman. After 18 years my return was virtually nonexistent and much of the time it was significantly below my principle investment. I think the 403b/401k has been oversold. After getting many employees off defined benefit plans many employers have reduced or dropped the match. Another trick is to require a higher contribution such as 8% to get a 50% match on the first 6%. It's not really a 50% match if you have to contribute 8% to get it. Expect to see more manipulation of these plans as well as revenue (taxing) ideas by the government in the future.
Income prohibits a Roth. My only saving grace has been investing in RE at the right time and putting in sweat equity. That strategy isn't working right now though it would be a good time if I was at the beginning of my journey not in the latter part of the middle.
Ask Dave Ramsey and he will tell you that you can expect a 12% annual return on "good quality growth stock mutual funds".....
This is one of the many reasons I don't listen to the guy anymore. Oh, and now is a great time to buy real estate too......
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