Retirement Distribution Calculator

Planning for retirement is one of the most important things you can do to ensure a stable financial future. Even if your retirement is decades away, it’s helpful to think ahead for many reasons. Understanding the big picture now will allow you to make better career and financial decisions. Making the financial decisions you need to make now will help you build a hearty retirement portfolio that will allow you to kick back and relax in your later years.

Use this retirement distribution calculator to better visualize the steps you need to take to accomplish your targeted annual retirement withdrawals. Below the tool, you’ll find more info on how to use it properly.

Cumulative Savings

This one’s simple: how much money do you expect to be in your accounts when you retire? Play around with this number—first use the best-case scenario, and then look at the worst-case scenario. The next few years or decades determines how big or small this number is, so you’ll want to look at as many scenarios as possible.

Your retirement savings may exist in one (or more) types of retirement plans, including:

• 401(k) Plans
• Individual Retirement Accounts (IRAs)
• Roth IRAs
• Roth 401(k)
• Savings Incentive Match for Employees (SIMPLE) IRA
• Simplified Employee Pension (SEP) IRA

Though they’re all designed for retirement, each of these accounts functions slightly differently and come with their own set of rules and regulations.

If you don’t have your retirement account set up yet, be sure to look into what plan is the best for your unique situation. A financial planner will help identify the best plan based on the tax treatment of withdrawals, required minimum distributions, income requirements, contribution caps, and more.

Monthly Spending

How much do you expect to spend per month? This requires a little work on your end: you’ll need to figure out the difference between your budget now and your potential budget in the future. (Need more help on your retirement budget? Check out this blog post on building your retirement budget!)

Your monthly spending needs to be two things: big enough to cover your budget, but small enough so you can sustain your retirement financially. You don’t want to run out of funds several years into retirement when you still have a decade ahead of you.

Retirement Withdrawal Strategies

The 4% rule

You may have heard of the 4% Rule as a withdrawal strategy. It is a general rule of thumb commonly used by retirees to determine how much their annual withdrawal should be. Add up the total amount of your retirement investments and withdraw 4% during your first year of retirement.

Every year after that, withdraw 4%, plus an additional percentage to account for inflation. The purpose of this rule is to provide a predictable income without completely depleting your account.

Other withdrawal strategies

In some cases, 4% isn’t the best strategy. Others find that fixed-dollar or fixed-percentage works better in their situation. Some utilize a systematic withdrawal plan, where you only withdraw the interest or dividends of your investments. This allows your portfolio to replenish and grow.

Each strategy has its own pros and cons. It’s always a good idea to consult with a financial planner about the best withdrawal strategy for you.

Additional Factors to Consider

Retirement length

We don’t know what tomorrow holds, so there is no way to know exactly how many years you’ll spend in retirement. However, you can estimate this number using the age you expect to retire and your projected life expectancy. In the United States, the current life expectancy is 78.6 years. By 2030, life expectancy is expected to rise to 81.7 years for males and females.

Annual rate of return

Retirement plans are not simply savings accounts; they are also a type of investment. Your retirement plan is a vehicle that holds investments such as stocks, mutual funds, bonds, and cash that is specifically earmarked for when you’re no longer working. This means that you can expect to see growth beyond the money you put in it every year.

To effectively plan your retirement, you need to account for the rate of return on these investments. Some folks are cautious and estimate a 4% return, while others are optimistic and hope for a 12% return. This can give you two dramatically different numbers. Even small changes to your annual rate of return estimation can provide different results.

The key to estimating your annual return rate is to look at the data and consider your unique investment portfolio. Much of your account performance depends on asset allocation and how long you’ve been investing. According to experts, a moderately aggressive portfolio will see an average return between 5% and 8%.

Financial planners often use 7% as the magic number with portfolios that are heavily invested in stocks. This is based on the historical performance of the stock market.

Estimated inflation

You’ve probably heard people talk about how a dollar doesn’t go as far as it used to— and it’s true. Unfortunately, the prices of goods and services don’t stay the same over time. Generally, the prices of everyday items increase.

This quantitative measure of the rate at which the prices of selected products and services rise over time is called inflation. Inflation weakens the purchasing power of money.

What does this have to do with retirement? Well, it’s likely that your money won’t be able to buy the things twenty years from now that it will today. It’s important to consider this when performing your calculations. Failure to do so may result in running out of money prematurely or not having enough each year to cover your cost of living.

You can estimate inflation rates by researching projections or looking at historical data. Of course, there’s no way to know for sure what the rates will be, but it’s always best to assume some degree of rising prices.

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer Member FINRA/SIPC and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2021.