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The Optimal Retirement
Planner
The Optimal Retirement Planner (ORP) is a retirement decision support system (RDSS)
that optimally schedules retirement savings and
withdrawals to maximize
the amount of money available for spending throughout retirement.
An RDSS looks like this:
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| Guidance |
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| Schedule of contributions to retirement savings accounts |
| Annual after-tax income |
| Schedule of withdrawals from retirement savings accounts |
| Schedule of IRA to Roth IRA rollovers |
| Schedule of IRA to After-tax Account transfers |
| Annual personal income tax bracket |
| Annual retirement account balances. |
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| Facts |
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| Current Age/Spouse's Age |
| Account Balances |
| Tax-advantaged contribution limits |
| Illiquid asset value (home) |
| Pension income |
| Social Security benefits |
| State Taxes |
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| Choices |
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| Annual retirement savings |
| Age to retire |
| Age to start Soc. Sec. benefits |
| Age to sell illiquid asset |
| Reverse mortgage? |
| Work after retirement? |
| Size of estate |
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The unplanned retirement is Uncle Sam's delight;
more taxes collected, less Social Security paid. |
To Use ORP |
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| Set the facts.
| | Make your choices.
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| | Review the guidance (results).
| | Modify your choices and run again (sensitivity analysis).
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ORP is built using the
tools and techniques of Operations Research. ORP uses an industrial strength linear programming optimizer
running on an Internet server.
| Linear Programming
- a mathematical technique for finding the
maximum of a function of many variables subject to a set of constraints.
To put it another way;
optimization is the selecting of a small
set of activities, from a very large universe of possible activities,
that makes the most money without breaking the rules
| ORP's optimizer computes the maximum amount of money available for spending over the
entire time span of retirement.
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The Big Picture of Retirement Financial Planning
Before Retirement
| The Miracle of Compounding
| Investments give off returns which are reinvested, which
then give off more returns. The earlier the investment the more money for retirement.
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| Optimal Savings Schedule
| ORP selects the optimal mix of savings accounts and amounts to fully exploit its optimal
retirement withdrawal strategy. |
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After Retirement
| Compounding Continues
| Even after retirement, when contributions stop and withdrawals begin,
the portfolio continues to grow for some years thanks to compounding. |
| Inflation
| The wrecker of retirement plans. The good news is that Federal fiscal and
monetary policies are providing price stability.
| | Taxes
| The graduated personal income tax on tax-deferred withdrawals sometimes challenges the conventional
wisdom of withdrawal strategies.
| | Optimal Withdrawal Strategy
| ORP maximizes after-tax retirement spending by optimally scheduling
retirement account withdrawals.
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is a retirement planner like no other!
ORP maximizes
retirement cash flow from investment returns and drawing down
the account's capital to a given estate level at the end of the plan. ORP's
linear programming optimizer maximizes the after-tax cash
available for spending during retirement by modeling compounding investment returns, inflation,
income taxes and minimum withdrawal requirements.
Everyone
needs to do retirement planning!
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1961-1981 Max out that 401K! |
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1943-1960 Early Retirement? |
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1925-1942 Into Retirement. |
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