Vanguard offers two free retirement tools.
The Retirement Nest Egg Calculator and the Retirement Income Calculator. Together they offer powerful retirement planning.
The Retirement nest egg calculator is an easy way to determine if your retirement savings will last.
While it’s an easy calculator to use, don’t be fooled by its simplicity.
Using a Monte Carlo simulator, it examines 5,000 simulations to produce its results.
Users enter six values: the number of years your portfolio should last, your portfolio’s current balance, how much you spend from the portfolio each year, and the percentage your portfolio is invested in stocks, bonds and cash.
The Vanguard Retirement Nest Egg Calculator then performs a Monte Carlo simulation using a random sampling of returns from historical data to create a range of projected portfolio balances by year.
It also calculates the probability, as a percentage, that your portfolio will survive the number of years specified.
For example, you want your portfolio to last 30 years. If you have a balance of $500,000 today invested in 50% stocks, 40% bonds and 10% cash, and spend $40,000 each year from your portfolio, the probability that the portfolio will survive 30 years is 22%.