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Make Your Own Retirement Spreadsheet — Part II
In the previous post, I suggested reasons why you might want to create your own financial planning spreadsheet, and described the nuts and bolts of setting one up. But there’s still the problem of choosing reasonable inputs and interpreting results in a way that gives you insight into your financial future — rather than leading you astray. In this post, I go over how to make the most effective use of your spreadsheet plan: how to handle inflation, what you might assume about investment rate of return, how to do sensitivity and what-if analyses, and how to check your results against other tools. Inflation — What to Do With It…
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Make Your Own Retirement Spreadsheet
In my last post, I encouraged those so inclined to create their own financial planning spreadsheets. However, I didn’t provide enough detail to allow the motivated reader to go and set one up. This post fills that gap, providing enough specifics to enable anyone who knows how to use a spreadsheet to map out her financial future on a home computer. If this sounds like something you might want to do, read on! Why Go to the Trouble? But, you may ask, why should you put the time and energy into making your own planning spreadsheet from scratch when there are plenty of powerful software programs out there that will…
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Create Your Retirement Plan: the Eightfold Path
Do you have a financial plan for your retirement? Do you need one? What exactly is a retirement plan, anyway? If your answers to these questions are a bit vague and uncertain, read on! This post will lay out why you need a plan for the years after you stop working (yes, you should have a plan), and how to go about creating one. The good news is it’s not that hard to do. In fact, if you’ve been reading my posts until now (and, of course, following up on my recommendations!), you’re 80% of the way there already. This post pulls the pieces together into a single whole; eight…
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10 Great Retirement Planning Blogs
There are quite a few excellent financial planning blogs out there – so many that I sometimes wonder why I’m adding my own site to what is already a crowded space in the blogosphere. Then I recall how much of what is out there is misleading, self-serving or just plain incomprehensible. My goal is to provide sound retirement financial planning ideas and advice, written in plain English, without any underlying agenda. I believe investing and financial planning are really quite straightforward if you can tune out the noise. I try to provide enough explanation and references that the curious reader doesn’t just have to take my word for what I’m…
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What the Heck is Monte Carlo Analysis?
In reading about personal finance, you may have come across references, often hushed and worshipful, to a mysterious thing called Monte Carlo analysis. Perhaps you wondered: What is it? Is it really the gold standard for financial planning? Are there any alternatives? If this sounds like you, read on! What is it? Monte Carlo analysis, developed by mathematician and nuclear scientist Stanislaw Ulam while working at Los Alamos in the 1940s, is an important tool for modeling a complex system when a key variable is unpredictable, but whose possible values can be described with a distribution (such as a bell curve). Monte Carlo essentially substitutes an entire probability distribution…
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Use Online Retirement Calculators to Check Your Work
Welcome back! If you’ve read my blog posts up to this point, you should have a pretty fair idea of your financial fitness for retirement: Do you (or will you) have enough money to retire (see this post); How should you manage your money once you stop working (see this post); When should you begin taking social security retirement benefits (see this post and this one); and How can you protect yourself from things that might go wrong (read this post)? You may have reassured yourself that you’re financially on track, or perhaps you’ve identified some weaknesses in your plan that need shoring up. But how do you know you…
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Should I Use a Bucket Strategy in Retirement?
When you hear the term “bucket,” do you get a far-away look and daydream about climbing Mt. Kilimanjaro, learning to play the flamenco guitar, or communing with century-old Galapagos tortoises? Or do you furrow your brow and try to recall what that financial adviser you met with a year or so ago was talking about? While it behooves us all to consider what we’d like to do while on this earthly realm, this post focuses on the second, more prosaic question – the use of buckets as a way to manage a retirement portfolio. What exactly is a bucket strategy? There are many variations on the bucket theme (approximately as…
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Managing Money in Retirement I: How Much Can I Withdraw?
Welcome back, and Happy New Year! My first posts covered how much to save for retirement. In the next several posts, I explore how to manage savings and withdrawals once you’re in retirement. OK, so you’ve made the break, attended your last office party, and are no longer punching a clock. How should you handle your savings? How much can you withdraw and spend every year? Wait a minute, you say – didn’t the last couple of blogs already answer that question? Why not withdraw 4% of your savings in the first year, then increase that with inflation each year to keep the purchasing power the same? Well, you would…
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Can I Retire Yet? (Part II)
Welcome back to the Retirement Hangout! If you haven’t read Part I of Can I Retire Yet?, I recommend that you go back and read that first. In Part I, you estimated the annual income stream you will need in retirement, and what portion of that needs to come from savings. But what size retirement savings stash will provide that income – for the rest of your life? Drawing Income from a Nest Egg — the 4% Rule Perhaps you’ve heard of the 4% Rule. This is the amount many financial planners suggest you can withdraw from a retirement portfolio and be confident your savings won’t run out. If…
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Can I Retire Yet? (Part I)
“How much money do I need to retire?” Just about everyone anywhere near retirement asks themselves this question – as do younger people planning ahead and, sadly, too many folks who are already retired but have some nagging doubts. Perhaps you’ve been faithfully saving and investing via your 401(k) plan or IRA and have accumulated a nice nest egg — maybe $250,000 or $500,000 or even more. Seems like a lot of money. But is it enough? How can you know? Countless places — easily accessible on the Internet — are all too willing to provide the answer. Unfortunately, many of them are also eager to sell you financial products or…