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Retirement calculators are powerful tools when used properly.
But retirement calculators can be weapons of mass deception when used incorrectly.
In episode #10 of the Financial Mentor podcast, Darrow Kirkpatrick and I reveal the tricks and traps to using retirement calculators right.
This topic is much bigger than just retirement planning. This is about planning your wealth and engineering your way to financial freedom using retirement calculators as a handy tool to make the math easy.
There are many nuances and little-known creative strategies that can allow you to achieve financial security much earlier than you ever imagined possible. And there are many potholes you must avoid so you don't make foolish decisions.
Related: 5 Rookie Financial Planning Mistakes That Cost You Big-Time (and what to do instead!) Explained in 5 Free Video Lessons
In this episode you will discover:
- The “magic number” myth and how to overcome it.
- The great inflation deception and why your personal inflation rate should be dramatically different from published government statistics.
- The 2 most important assumptions that will make or break your financial security in retirement.
- The little-understood but gargantuan impact that volatility and sequence of returns risk has on your financial security.
- How market valuation and interest rates affect your sequence of returns risk.
- Why life expectancy assumptions force you to be overly conservative – unless you adopt this unusual viewpoint.
- The 3 ways to model investment return assumptions and a simple solution for their inherent inaccuracy.
- The dangerous deception behind Monte Carlo analysis that causes overconfidence when your risk of failure is at its worst.
- How 2 approaches – the “fuel gauge” analogy and iteration – can give you peace of mind with uncertainty in the future.
- How to use a retirement calculator to engineer your path to wealth instead of just estimating if you have enough money to retire.
- Discover little-known strategies to retire sooner and with greater financial security.
- The red flag that warns you that a particular retirement calculator should be avoided.
- How to balance the inherent tradeoffs between accuracy and simplicity when modelling your financial future.
- and much more….
Resources and Links Mentioned in this Session Include:
- Darrow's website is at http://caniretireyet.com
- Darrow's analysis of the 3 Best Free Retirement Calculators.
- The Financial Mentor podcast episode #2 with Darrow – How To Retire at 50.
- My 7 Steps To 7 Figures Wealth Building Course
- My top-rated Ultimate Retirement Calculator.
- A directory page with all of my retirement calculators
- My book on Amazon How Much Money Do I Need To Retire?
- Darrow's book on Amazon Retiring Sooner: How to Accelerate Your Financial Independence
- The book Your Money or Your Life on Amazon.
- Employee Benefit Research Institute
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Thanks for your support and I hope you enjoyed this episode. Please let me know what you think in the comments below…
Retiring Soon? Pick Up a Copy of My Book.
The conventional approach used by experts to figure how much money you need to retire is fundamentally flawed. Worse yet, you won’t even know it until it’s too late.
This book takes you behind the scientific façade of modern retirement planning to reveal simple, robust solutions that will help you retire sooner and with greater financial security.
It is a breath of fresh air to hear this nuanced, sophisticated discussion. I tried to challenge some of the FI bloggers for their simplistic, down right silly approach, but their religious faith in buy-and-hold index funds just can’t be broken.
Dan Amerman has done great work on these topics. He says that he parted ways with the traditional retirement planning 20 years ago when he realized that everyone can’t compound their returns at 8-10% foreva, since the market rate of return over the long term must reflect the real–ie inflation adjusted–rate of growth of the economy.
Also, Pfau certainly gets the problems, but his social security analysis is wanting. He doesn’t even attempt inflation adjusting, or looking at the effect the colas being artificially low. He doesn’t even pay lip service to the problem of medicare premiums not being frozen for those who take ss late. Amerman’s anlysis is far superior.
I recommend you review Dan Amerman’s work and think about having him on your podcast.
Anyway, well done.
Dan and I are familiar with each other’s work and have personally spoken in the past.