Retirement Planning and Multiple Scenario Analysis Example

Transcription

1 Retirement Planning and Multiple Scenario Analysis Example We ran the following retirement scenarios:. Current Scenario (53% Probability) The first column is your current scenario without making any changes. 2. D3 Recommended Scenario: Retire at 60 (75% Probability) The D3 recommended scenario has Daniel working an additional two years to age 60. By working two additional years, you will be able to meet all of your retirement goals without needing to adjust spending goals or savings. 3. Alternate Scenario: Reduce Expenses (77% Probability) An alternative would be for you to reduce your base living expenses by $25,000 per year and instead saving $25,000 per year until retirement. By making this adjustment to your current lifestyle, you will be able to reach your retirement goals. These examples are for illustrative purposes only and should not be construed as individual advice.

2 This Worksheet allows you to analyze and compare the results of one or more scenarios that you created by varying the Plan assumptions. Estimated % of Goal Funded Goals Current Scenario Retire at 60 Reduce Expenses Average Return Bad Timing Average Return Bad Timing Average Return Bad Timing Needs 98% 87% Retirement 0 Health Care 0 Travel Budget 0 Charitable Gifts 0 St. Joseph Tuition - Susan 0 St. Joseph Tuition - Tommy 0 Benet Academy Tuition - Bobby 0 College - Susan 0 College - Tommy 0 College - Bobby 0 Car Payment Safety Margin (Value at End of Plan) Current dollars (in thousands) : $39 $39 $5,032 $,907 $5,239 $2,068 Future dollars (in thousands) : $,09 $,09 $6,060 $6,085 $6,720 $6,600 Page 2 of 3

3 Monte Carlo Results Likelihood of Funding All Goals Your Confidence Zone: 7-9 Total Spending : $8,784,5 $8,283,43 $7,99,5 Stress Tests Method(s) Bad Timing Program Estimate Years of bad returns: 2029: : -5.4 Bad Timing Program Estimate Years of bad returns: 203: : -5.75% Bad Timing Program Estimate Years of bad returns: 2029: : -5.75% Funding Order Assets - Ignore Earmarks No No No Retirement Income - Ignore Earmarks No No No Page 3 of 3

4 Hypothetical Average Rate of Return Before retirement portfolio set : D3 Models D3 Models Portfolio : Current Moderate Moderate Total Return : 5.6% 6.% 6.% Standard Deviation :..86%.86% Total Return Adjustment : Adjusted Real Return : 3.% 3.6% 3.6% After retirement portfolio set : D3 Models D3 Models Portfolio : Current Moderate Moderate Total Return : 5.6% 6.% 6.% Standard Deviation :..86%.86% Total Return Adjustment : Adjusted Real Return : 3.% 3.6% 3.6% Base inflation rate : Tax-Free Options Before Retirement Reallocate a portion of bonds to tax-free: No No No Percent of bond allocation to treat as tax-free: After Retirement Reallocate a portion of bonds to tax-free: No No No Percent of bond allocation to treat as tax-free: Page 4 of 3

5 Goals Basic Living Expense Retirement Age Daniel Planning Age Daniel Mary Both Retired Both Retired $94,592 $94,592 $69,592 One Alone - Retired Mary Alone Retired $55,4 $55,4 $35,4 Daniel Alone Retired One Alone - Employed Daniel Alone Employed Health Care Percentage to increase costs : Cost determined by Schedule : Travel Budget Year : Cost : Is recurring : Years between occurrences : This goal will end at End of plan. Charitable Gifts Year : Cost : Is recurring : Years between occurrences : See details $25,000 $32,274 See details $25,000 $32,274 See details $25,000 $32,274 This goal will end at End of plan. Page 5 of 3

6 Goals St. Joseph Tuition - Susan Year : Cost : $3,972 $3,972 $3,972 Is recurring : Years between occurrences : Number of occurrences : St. Joseph Tuition - Tommy Year : Cost : $2,800 $2,800 $2,800 Is recurring : Years between occurrences : Number of occurrences : Benet Academy Tuition - Bobby Year : Cost : $2,000 $2,000 $2,000 Is recurring : Years between occurrences : Number of occurrences : College - Susan Year : Years of Education : Annual Cost : $50,000 $50,000 $50,000 College - Tommy Year : Years of Education : Annual Cost : $50,000 $50,000 $50,000 College - Bobby Year : Page 6 of 3

7 Goals Years of Education : Annual Cost : $50,000 $50,000 $50,000 Car Payment Year : Cost : $7,00 $7,00 $7,00 Is recurring : Years between occurrences : Number of occurrences : Retirement Income Pension Income (Daniel) Annual Income : Start Year : Select when income will end : Year to end retirement income : Survivor Benefit : Social Security Select Social Security Strategy Daniel Filing Method : Age to File Application : Age Retirement Benefits begin : First Year Benefit : Mary Filing Method : Age to File Application : Age Retirement Benefits begin : First Year Benefit : Reduce Benefits By : $8,555 Daniel's retirement End of Daniel's Plan Current $3,668 $5,834 $8,555 Daniel's retirement End of Daniel's Plan Current $3,668 $5,834 $8,555 Daniel's retirement End of Daniel's Plan Current $3,668 $5,834 Page 7 of 3

8 Asset Additions Daniel 40(k) Maximum Maximum Maximum Roth: N/A N/A N/A Maximum contribution each year: % Designated as Roth: Plan addition amount: $28,600 $28,600 $28, Frank - Fund All Goals Daniel Fidelity TOD Brokerage Account $00,000 Inflating $00,000 Inflating $00,000 Inflating Frank - Fund All Goals Additional Savings After Susan's 529 $6,000 Inflating $6,000 Inflating $6,000 Inflating Joint - Fund All Goals Additional Savings After Private School Ends $8,772 Inflating $8,772 Inflating $8,772 Inflating Joint - Fund All Goals Additional Savings After Tommy's 529 $6,000 Inflating $6,000 Inflating $6,000 Inflating Joint - Fund All Goals Additional Savings After Bobby's Page 8 of 3

9 Asset Additions $6,000 Inflating $6,000 Inflating $6,000 Inflating Joint - Fund All Goals Additional Savings after Car Payment Ends $7,00 Inflating $7,00 Inflating $7,00 Inflating Joint - Fund All Goals Additional Tax Savings After RSU's End $30,000 $30,000 $30, Frank - Fund All Goals Susan's 529 Plan $6,000 $6,000 $6, Frank - College - Susan Tommy's 529 Plan $6,000 $6,000 $6, Frank - College - Tommy Bobby's 529 Plan $6,000 $6,000 $6,000 Frank - College - Bobby Page 9 of 3

10 Extra Savings by Tax Category Daniel's Qualified Mary's Qualified Daniel's Roth Mary's Roth Daniel's Tax-Deferred Mary's Tax-Deferred Taxable $0 $25,000 Stock Options Company Stock Include in plan : Stock Options Scenario : Vesting Scenario Scenario Scenario Termination Year : Return : Restricted Stock Company Stock Include in plan : Restricted Stock Scenario : Scenario Scenario Scenario Last year shares will vest : Return : Tax Options Include Tax Penalties : Change Tax Rate? No No No Year To Change : Change Tax Rate by this % (+ or -) : These examples are for illustrative purposes only and should not be construed as individual advice. Page 0 of 3