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T. Rowe Price Retirement Income Calculator


T. Rowe Price Retirement Income Calculator Review
T. Rowe Price Retirement Income Calculator Screenshot

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Review of: T.Rowe Price Retirement Income Calculator

What it does: You input income sources such as Social Security and pensions, as well as asset values and it projects the likelihood that your plan is sustainable through life expectancy, and provides suggestions (such as reduced spending) to make your plan sustainable.

Target audience (in retirement, near retirement etc.): From 20 years prior to retirement to living in retirement.

Not intended for: Those who don’t like detail or more than 10 questions.

Best Feature: Output graphs are very easy to understand with a side by side comparison and summary of inputs.

My personal opinion/first reaction: Four different input screens might be hard to navigate for someone who wants a quick answer. I like that it leaves the guess work out of things like rate of return by giving you probabilities based on possible market outcomes rather than assuming a fixed rate of return. It also gives you a percentage chance that you would make it to your desired life expectancy based on your current spending, and it tells you what you should spend if you want a 95% chance of not running out of money before your desired life expectancy.

Pros of the T. Rowe Price Retirement Income Calculator:

  • Works for both single or married.
  • May take a few minutes, but gathers a few personal details (like date of birth) so this makes the output more accurate.
  • Can select where you are in the retirement process: saving for, pre-retirement or retired.
  • Uses Monte Carlo simulations for rate of return and chances you would run out of money.
  • It has a picture and link to a calculator as well as a worksheet calculator to help estimate your expenses and such, which are nice features.
  • Short summary video presentation is provided after you have made your inputs. It tells you the likelihood that your savings will last to your age 95 based on your desired spending and income sources. If savings are not likely to last, it tells you what level of spending would be sustainable.
  • Can print a report directly to PDF.
  • Can modify a few assumptions to see a side by side comparison of results.
  • Assumptions and explanations are laid out below the results.

Cons of the T. Rowe Price Retirement Income Calculator:

  • All savings must be input together (taxable & tax deferred). Can’t designate if you have both and how much of each you have.
  • Must estimate your allocation between stocks, bonds and short-term investments… this is not easy to do if you have a lot of balanced funds and or multiple accounts. This information is used for the Monte Carlo simulations. In this trial I did 100% short-term.
  • Must include taxes in estimated expenses. Most people have no idea how to accurately estimate taxes.
  • Allows you to add Social Security income, but you can’t change the amount in later years, as you would need to do if you switched from a spousal benefit to your own benefit. Same restrictions for pensions.
  • Automatically assumes age 95 for longevity and you don’t have the chance to modify that assumption until the first trial has been run.

Visually appealing (Y/N): Yes

Ease of Use (Very Easy to Very Difficult): Moderately easy

What it does not do: If inputting as a married couple both have to have the same life expectancy and same retirement date. It does not allow inputs for part-time work. The other drawback of this retirement calculator, like most online retirement calculators, is the way it calculates taxes.

Taxes: Custom advice about when to take pensions, Social Security and how much to withdraw from which types of accounts can make a big difference in the amount of after-tax retirement income available to you. Most retirement calculators including this one, do not allow you to easily adjust these things and do not accurately calculate taxes, so decisions that could increase your retirement income or net worth can be missed.

Review conducted by Kim Morton, CFP®, on 2/9/12.

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