Just a quick shout out to one of my favourite blogs, The Simple Dollar. Yesterday’s entry on how to retire on $1 million (or if it can be done) well-illustrates the type of basic analysis underpinning retirement planning calculators everywhere.
My only caveat with the analysis, like most of these simple ones, is the sensitivity to assumptions. This article tries several types of assumptions, which makes the thing stand out (in my opinion). But particularly when long time periods are involved, small changes in assumptions can drastically change results. Given we have basically no idea what the correct figures will be, caveat emptor for those placing too much reliance on one run of the ‘simulation’!
Sadly there isn’t a good fix for unknown parameters in the analysis, but rest assured I’ll let you know when I have a reliable crystal ball.