Jim Otar’s Otar Retirement Calculator can be used to really plan your retirement. He does not subscribe to the 3-6-9 philosophy of most financial planners. What’s that you say, what is the 3-6-9 philosophy?
When you go to see most financial planners they will use what is almost an industry-wide de facto standard of of long-term averages. They are 3% inflation, 6% fixed income returns and 9% equity returns.
Using these figures your retirement will be rose and you can dance down the yellow brick road with Dorothy and the Tin Man if you like.
But Jim Otar whose background is engineering totally disagrees with this philosophy and has created his own calculator. I think it was Jim who said why do we design an oil rig to withstand a Hurricane and don’t build a retirement plan to withstand a Bear Market crash? So he went out to try to do just that.
What is so special about this calculator is it doesn’t use those voodoo mathematics like long term averages?
It is based on real world results and so uses real world returns to work out your retirement. There is no guess-work involved.
After entering your personal information Jim’s Retirement Calculator goes to work and uses actual historical data going back to 1900 to work out how your nest egg would have survived beginning in each of those years. He calls this his “aftcast”. It does NOT try to forecast the future.
The table indicates the probability of portfolio depletion, as well as the outcome:
Diagram courtesy of Otar Retirement Solutions
The model works with four different asset classes, Equity, Nominal Bonds, Inflation-Indexed Bonds and Cash.
It uses equity market data from USA, UK, Australia, Japan and Canada.
What is really clever though is the calculator works out if you are likely to run out of money and then if this is likely yo happen if actually builds a ladder of immediate annuities to provide that life-time income all us Baby Boomers seek. Please don’t discount annuities until you have seen how they are used. all investments have a place in a portfolio at different stages and dependent on the health of that portfolio. Nothing should be rejected out of hand.
Now you may be wondering how to get this calculator. By the way I am not getting any compensation for reviewing and recommending this program.
You can get the FREE Trial version of Otar Retirement Calculator here. Use it and take the results to your next meeting with your financial planner. That will be fun ;0)
Or get the Otar Retirement Calculator - Full 2008 Edition here for only $59.99. The differences are you get extra screens and analysis pages and you can vary the asset allocation amount which you cannot do in the Light Version.
Allow yourself at least an hour on the site to read what he writes about. Also read his articles on the Time Value of Fluctuations. This article might give you an epiphany regarding your the need to protect your nest egg. moment you may be looking for. Also read his piece on Monte Carlo simulations.
I want to check out the calculator a little more and get some other opinions but I will most likely use it as the benchmark for all other reviews of retirement calculators on this blog. I believe it is that good.
Enjoy and please leave your comments by clicking on the comment link on the top right hand side of this post. Or click on one or more of the social bookmarking icons below. Thank you.
