Retirement Calculator Go Boom

The above spreadsheet is the bottom slice of results from a how much do I need to save for retirement calculator I found at Yahoo Finance. I plugged in my numbers, assumed retiring at 75, 5% returns, 3% inflation and that we would get social security and the result for living to 105 was that not only do I not have to save anymore money but that I will have $5.8 million left in the bank.


To answer your first question, we are not wealthy. Comfortable maybe, but not wealthy. Where this sort of thing is concerned, if you get a result that doesn’t make you at least a little uncomfortable you should probably be skeptical unless as a person making $50,000-$150,000 you inherited $6 million from an uncle you never knew you had or something similar.

Interestingly when I assumed 6% returns the result said I would have $10 million left over. While there is no convincing me either number could ever be reality there is probably something to there being a huge difference to the compounding effect of 100 basis points annualized.

One big flaw in these types of calculators is that they assume linear returns. The market might average 5% or 10% or any other number annualized for the time period you care about but there will be very few years where it actually hits that average. And of course the above type of calculator can’t account for plan-alteringly-expensive one off financial events.


  1. My guess is that the ending number was probably in nominal dollars. One should really use real returns in these sorts of exercises.

  2. Right, it has my social security income at $323,166 so it is clear that the $5.8 mill is not really $5.8 mill but it would still be several years of expenses left over.

  3. Roger, you have repeatedly stated that you do not plan to be eligible for SS and also that your own personal investment portfolio is light in equities and heavy in fixed income. Given that the current real return prospects for fixed income are mostly negative aren’t you a bit concerned that your savings is going to decrease in purchasing power?

    I know that you say you will continue to work as long as you can, but sometimes things don’t work out the way we plan.

  4. My siblings and I are heirs to a cranberry bog fortune, real old new england cranberry money. JOKE

    The same calculator said that if i retire at 65 that I need to put away $8800 per year for the life style I want (in today’s dollars). The amount I put away is such that more than $8800 goes into equities while still targeting a low equity exposure. I max out the HSA, max out my SEP and put some in taxable savings too. SEP limits are much higher than 401ks.

    And yes I do want to work pretty much forever, I realize I may change my mind and realize that I may not be able to.

    We are fortunate I realize and if something ever changes with my income then i will make changes as necessary but I don’t need to invest for a six figure retirement when we are very happy with a $50,000 or $60,000 lifestyle (in today’s dollars).

  5. Useless trivia note: the “…Go Boom” phrase originated at my alma mater Ball State University! Between this outstanding catch phrase and David Letterman, we Cardinals beem with pride every time we hear the phrase. So thank you!

  6. No doubt, there is peace of mind from a LBYM lifestyle.

  7. The number might be right, might be wrong… you really haven’t given us enough information to decide. I do these sorts of spreadsheet myself, so I know that you aren’t showing us your living expenses, housing costs, medical spending estimates… and mostly, how large of an initial portfolio that 5 or 6 percent is coming from.

  8. Something those retirement calculators never take into consideration is taxes. If you have a $2M portfolio and need a starting $80K/year (a safe 4% withdrawal frequently recommended), then you have to withdraw $80K plus whatever the taxes are on those withdrawals.

  9. Roger,

    Also remember that real inflation (not the government manipulated one) is more than 3%; in fact, in March, they will revise the way inflation is calculated for social security increases. (clue: it is lower than the way the do it now). But yeah, here I am at 63, plan to work part time consulting forever, and my Fidelity guy laughed and said that if I kept everything in cash, I would still be OK. Yes, very linear.

  10. The sequence of annual returns are a huge factor when tapping the portfolio for income. A portfolio with a few down years at the beginning of the drawdown phase will end up quite a bit lower in value vs. a portfolio with the sane return, but positive results at the beginning of the drawdown period. Sequence of returns do matter, however most portfolio simulations to reduce volatility count on a large weighting of fixed income to temper the probabilty of negative outcomes during the early years, and use historical data of a 30 year bull market in fixed income to bolster their case. Buyer beware!!!


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