How To Calculate Your Retirement Number

Most people think of your retirement amount when they refer to how much money you will 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 average movie ticket price today, which is 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

Can I purchase gold with my self directed IRA?

You can purchase gold with your self-directed IRA, but you must first open an account at a brokerage firm like TD Ameritrade. If you have an existing retirement account, you can transfer funds to another one.

The IRS allows individuals to contribute up to $5,500 annually ($6,500 if married and filing jointly) to a traditional IRA. Individuals are allowed to contribute $1,000 each ($2,000 if married or filing jointly) to a Roth IRA.

You might want to purchase physical bullion, rather than futures contracts if you are going to invest in gold. Futures contracts, which are financial instruments based upon the price of gold, are financial instruments. These contracts allow you to speculate on future gold prices without actually owning it. You can only hold physical bullion, which is real silver and gold bars.

How Much of Your IRA Should Be Made Up Of Precious Metals

It is important to remember that precious metals can be a good investment for anyone. You don’t need to have a lot of money to invest. In fact, there are many ways to make money from gold and silver investments without spending much money.

You might also be interested in buying physical coins, such bullion rounds or bars. Also, you could buy shares in companies producing precious metals. Or, you might want to take advantage of an IRA rollover program offered by your retirement plan provider.

You can still get benefits from precious metals regardless of what choice you make. Even though they aren't stocks, they still offer the possibility of long-term growth.

Their prices are more volatile than traditional investments. This means that if you decide on selling your investment later, you'll likely get more profit than you would with traditional investing.

Is gold a good IRA investment?

Anyone who is looking to save money can make gold an excellent investment. You can also diversify your portfolio by investing in gold. But gold is not all that it seems.

It's been used throughout history as a currency, and even today, it remains a popular form of payment. It's often referred to as “the world's oldest currency.”

But unlike paper currencies, which governments create, gold is mined out of the earth. It is very valuable, as it is rare and hard to create.

The supply-demand relationship determines the gold price. The strength of the economy means people spend more, and so, there is less demand for gold. Gold's value rises as a result.

The flip side is that people tend to save money when the economy slows. This results in more gold being produced, which drives down its value.

This is why investing in gold makes sense for individuals and businesses. If you have gold to invest, you will reap the rewards when the economy expands.

In addition to earning interest on your investments, this will allow you to grow your wealth. You won't lose your money if gold prices drop.

What precious metals do you have that you can invest in for your retirement?

Gold and silver are the best precious metal investments. Both are easy to sell and can be bought easily. Consider adding them to the list if you're looking to diversify and expand your portfolio.

Gold: The oldest form of currency known to man is gold. It's also very safe and stable. It is a good way for wealth preservation during uncertain times.

Silver: Silver has been a favorite among investors for years. It's an ideal choice for those who prefer to avoid volatility. Silver tends instead to go up than down, which is unlike gold.

Platinum: A new form of precious metal, platinum is growing in popularity. Like gold and silver, it's very durable and resistant to corrosion. It's however much more costly than any of its counterparts.

Rhodium: Rhodium can be used in catalytic convertors. It is also used in jewelry-making. It is also quite affordable compared with other types of precious metals.

Palladium (or Palladium): Palladium can be compared to platinum, but is much more common. It's also more accessible. This is why it has become a favourite among investors looking for precious metals.

Is physical gold allowed in an IRA.

Gold is money. Not just paper currency. People have used gold as a currency for thousands of centuries to preserve their wealth and keep it safe from inflation. Today, investors invest in gold as part a diversified portfolio. This is because gold tends do better in financial turmoil.

Many Americans are now more inclined to invest in precious metals like gold and silver than stocks or bonds. It is possible to make money by investing in gold. However, it doesn't guarantee that you'll make a lot of money.

One reason is that gold has historically performed better than other assets during periods of financial panic. Between August 2011 and early 2013 gold prices soared nearly 100 percent, while the S&P 500 plunged 21 percent. During those turbulent market conditions, gold was among the few assets that outperformed stocks.

One of the best things about investing in gold is its virtually zero counterparty risk. Your stock portfolio can fall, but you will still own your shares. But if you own gold, its value will increase even if the company you invested in defaults on its debt.

Finally, the liquidity that gold provides is unmatched. This means that you can sell gold anytime, regardless of whether or not another buyer is available. You can buy gold in small amounts because it is so liquid. This allows one to take advantage short-term fluctuations within the gold price.


  • If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (
  • This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (
  • If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (
  • (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (
  • Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (

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A rising trend in gold IRAs

As investors seek to diversify their portfolios while protecting themselves from inflation, the trend towards gold IRAs is on the rise.

Owners can invest in gold bars and bullion with the gold IRA. It can be used for tax-free growth and provides an alternative investment option for those concerned about stocks and bonds.

Investors can manage their assets with a gold IRA without worrying about market volatility. The gold IRA can be used to protect against inflation or other potential problems.

Investors also have the benefit of physical gold, which has unique properties such durability, portability and divisibility.

Additional benefits of the gold IRA include the ability to quickly pass ownership to heirs. Additionally, the IRS does not consider gold a money or a commodity.

Investors looking for financial security are increasingly turning to the gold IRA.

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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