Retirement Planning

Our approach to retirement planning is different in two ways. First, many retirement analyses fail to address the effect of market variability in their assumptions. Even though the US stock market¹ has earned roughly a 10.9% rate of return on average for the last few decades,² it did so with many fluctuations. In other words, the approximate 10.9% return was only an average. There were many years when the market posted a negative return. If too many negative years happen early in your retirement, you run the risk of running out of money. To address this risk, we prepare retirement cash flow analyses using Monte Carlo Analysis. Monte Carlo Analysis employs computers to simulate thousands of retirement periods, in both good and bad economic times, so that we can stress test our assumptions and provide a more accurate picture of what might happen in your retirement. The results of these simulations estimate the probability of your money lasting throughout your retirement.

1. The market as measured by the S&P 500 index. The S&P 500 Index is an unmanaged but commonly used measure of common stock total return performance. It is computed of 500 usually held common stocks listed on the NYSE, AMEX and OTC markets. It is not possible to invest directly in an index.

2. Source: http://politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html. Returns calculated from January, 1950 through December, 2009 and assumes a full reinvestment of dividends.

Past performance is not indicative of future results.