Am I a young dreamer at age 41?

[Aiming_4_55]

I've been using several retirement calculators with positive results in my mind. Some of the retirement calculators that I've used are from CNN, MSN, AARP, Kiplinger, Flexible Retirement Planner, and FIRECalc.

For the calculators, I've been using average rate of returns in the 6% prior to retirement and 4% after retirement.

Are the rate return I'm using too conservative (maybe I can ER sooner) or too aggressive?

Thanks for your comments.

 

[Nords]

I don't know anything about the other calculators you've used, but FIRECalc gives you a pretty good dose of history. The "problem" is that if you retire in your early 40s and live for 50+ years then FIRECalc doesn't have as much data to work with.

If you really want to tweak all the retirement-planning parameters then you could sign up for a membership with FinancialEngines.com, or pay for ESPlanner, or try ORP, or read Otar's PDF. If you can't find failure among that bunch of fairly credible calculators then you're good to go.

 

[GeoffC]

What are you assuming for risk?

The problem with online calculators is that many do not account for risk levels--they assume you get a fixed rate of return. This will make your outcomes look pretty optimistic.

There are also issues with using pure historical data as your basis for calculations. Namely that the equity risk premium (the additional return that you get from investing in equities) is not constant nor is it guaranteed. There are some smart people who believe that the equity risk premium will be lower in coming decades due to slower growth, etc. Rob Arnott and Peter Bernstein wrote a great paper on this called What Risk Premium is Normal? You can just Google the title to find it.