I have just read a book co-authored by Laurence J. Kotlikoff and Scott Burns entitled the book, “Spend ’til the End”. A more explanatory sub-title is, “The Revolutionary Guide to raising your living standard - today and when you retire”.

I know of Scott Burns from his financial commentary on the Web and he also created the couch potato portfolio for investing which has gained popularity.

I did know much about Mr Kotlikoff though. He is an economist who has used his economic knowledge and skill to co-developed a software program called E$planner. It is built around a system called “consumption smoothing” which I find very interesting.

It’s the “when you retire” that got me interested at first. I was a little put off by the title initially because I thought it was irresponsible, but after I read the first couple of chapters I realised that the theory of “consumption smoothing” was worth learning more about.

Mr Kotlikoff debunks the idea of limiting your spending in retirement to 4% of your retirement nest egg. This got my attention because it concerned me that I had to but static limits on what I planned to do in retirement. There are too many things that can occur in live that may mean spending more or less at different times. Read the rest of this entry »

Today I thought I would take a look at the Vanguard Retirement Income Calculator. This online calculator attempts to calculate the monthly retirement income you are likely to have at retirement.

Retirement Income Calculators take a different approach to the Otar Retirement Calculator. They look purely at estimated monthly income and assume you will need a percentage of your pre-retirement income to live on.

Things I like about it

• Results are shown graphically as you change the slide bars.
• The results are shown in today’s dollars adjusted for inflation.
• It give you a good feel for how your personal contributions, Social Security and any Pension Benefits all add up to a monthly income.
• It is very easy to try different “What If’s” to see different results.
• They explain the assumptions that they are making for the calculation.
• They work it in today’s dollars so you can relate to it.
• They give a disclaimer advising you that their calculator is not to be taken as investment advice.
• It uses the 4% Rule which is a good rule of thumb for withdrawal rates.
• It graphically shows how increasing your savings can have a dramatic affect on the Monthly Retirement Income.

Things I don’t like about it Read the rest of this entry »