Retirement Calculator: Planning around Volatility

What will last longer - your money or yourself? This calculator uses historical stock market data to let you check your chances for a comfortable retirement.


Starting Principal at Retirement:   $
Time in Retirement:     years
Desired Annual Withdrawal: $
Adjust for Inflation
Principal you'd like to have left    
to leave to your heirs:
Portfolio: % stocks / % cash

Use market data from through  
"Stocks" lose % in annual expenses
"Cash" earns % above inflation


S&P 500 returns (dividends included): Robert Shiller and Yahoo! Finance


Retirement Planning - Success and Failure

The calculator assumes that the withdrawals occur at the start of each year, and then rebalances your portfolio at the end of each year. "Failures" are the time periods where your money would have run out sooner than you hoped.

You can see a risk/reward tradeoff here: increasing your stock allocation (say from 50% to 75%) can decrease the number of failures, but also increase the severity of the worst failures.

Also note that the calculator confirms a popular rule of thumb: you can annually withdraw four percent (inflation-adjusted) of your starting principal with a high probability that your money will last for a long (like 35 years) retirement.

And now for something troubling: most of the failures don't happen where you might expect, clustered around years like 1907, 1929 and 1987. Instead, they mainly straddle the long stagflation period of the 1970s. This seems like something for our politicians to be concerned about: if inflation heats up just when baby-boomers are hoping to retire in record numbers, there may be some serious disappointment.

(There's some good news, though: the average person's annual spending, adjusted for inflation, doesn't really remain constant; it declines steadily during retirement.)



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Article Contents
Market Abnormality
Significant Outliers
Ups and Downs
Long Term Risk
Momentum & Reversion
Crashes & Recoveries
Retirement Planning
Skill vs. Luck
Books & Links