By Sarah Morgan
When will your retirement savings run out? A new tool helps calculate that doomsdate.
The Putnam Retirement Income Analysis tool aims to help savers figure out how quickly they can spend down their nest egg and how long that money is likely to last. The company says it’s focusing on how people handle their assets in retirement because transitioning from saving to spending comes with risk. “Once you start taking money out, the risk goes up dramatically. If you take it out in a down market, you’re never going to recover that,” says Jeffrey Carney, head of global products and marketing for Putnam.
The tool highlights the problems that losses around the point of retirement can cause by showing average outcomes along with worst-case scenarios. The team behind the tool says those worst-case scenarios are essentially based on retiring at the wrong time. It’s crucial to have a conservative asset allocation as you head into retirement, so bad luck in the market doesn’t throw off your plan too badly, they say.
To use the tool, start by entering the total amounts you’ve got saved in different kinds of accounts. Then you can set the age when you want to retire and see how much monthly income you can draw to make your funds last through average life expectancies, or for a certain number of years. You’ll also see an estimate of how much would be left of your savings at the end of that period – in the worst case, there’s a shortfall, and in the best case, an estate to pass on. Alternatively, you can tell the tool how much of your savings you want to draw each month and see how many years your money will last in the best- and worst-case scenarios.
SmartMoney’s own Retirement Planner will take your current salary and savings rate and show you if you’re on track to retire when you want to; using our advanced settings, you can also model better or worse returns on your investments and test out other scenarios.