Retirement Savings & Income Planning

A method that calculates the lump sum of capital a client must accumulate by retirement to fund the stream of inflation-adjusted withdrawals needed for the rest of life.

Capital liquidation spends down both principal and earnings, leaving little/nothing at death; capital preservation (retention) lives off earnings only, leaving the principal intact for heirs. Preservation requires a larger nest egg.

The percentage of preretirement gross income a client needs to maintain their standard of living in retirement, typically estimated at about 70-80%.

After retirement certain expenses drop or disappear: payroll (FICA) taxes, retirement-plan savings, work-related costs, and often a paid-off mortgage; lower total spending needs lower replacement income.

A TVM technique that discounts/grows the income need using the real (inflation-adjusted) rate of return, so all calculations stay in today's dollars and automatically keep withdrawals rising with inflation.

Real return = [(1 + nominal) / (1 + inflation)] - 1. It is slightly less than simply subtracting inflation from the nominal rate.