Vision Otar2

A Fresh Look at A Fresh Look at Your Retirement PlanYour Retirement Plan

byby

Gregor McDonald, CFPGregor McDonald, CFP®®

Vision Financial PlanningVision Financial Planning


• Recent market events compel us to review your Recent market events compel us to review your retirement plan in a more realistic wayretirement plan in a more realistic way

• After every market correction, we see that plans After every market correction, we see that plans that were prepared using conventional retirement that were prepared using conventional retirement calculators, become irrelevantcalculators, become irrelevant

• Retirement dreams seem to be pushed further Retirement dreams seem to be pushed further and further away, especially after each market and further away, especially after each market correctioncorrection

Copyright ©2009 Retirementoptimizer.com Inc.


• Before your retirement dreams turn into Before your retirement dreams turn into retirement nightmares, let’s review your retirement nightmares, let’s review your retirement planretirement plan

• This time, I propose using a new tool that is This time, I propose using a new tool that is significantly more innovative than other significantly more innovative than other retirement calculators that we have been usingretirement calculators that we have been using

• This new retirement calculator uses an entirely This new retirement calculator uses an entirely different philosophy. It may change the way we different philosophy. It may change the way we look at retirement planninglook at retirement planning



All conventional retirement calculators make a All conventional retirement calculators make a FORECASTFORECAST using certain assumptions: using certain assumptions:

• average assumed portfolio growth rateaverage assumed portfolio growth rate

• average assumed inflationaverage assumed inflation



The following example shows the reality for three The following example shows the reality for three generation of retirees:generation of retirees:

• The grandfather retires at the beginning of 1929The grandfather retires at the beginning of 1929

• His son retires at the beginning of 1966His son retires at the beginning of 1966

• His grandson retires at the beginning of 2000His grandson retires at the beginning of 2000



• Each one starts with $1 million of retirement Each one starts with $1 million of retirement savingssavings

• Each one needs $60,000 to take out annuallyEach one needs $60,000 to take out annually

• Each one start his retirement at age 65Each one start his retirement at age 65

• We assume an annual portfolio growth rate of 8%We assume an annual portfolio growth rate of 8%

• We assume an inflation rate of 3% per yearWe assume an inflation rate of 3% per year

Let’s see what happens to their retirement dreams:Let’s see what happens to their retirement dreams:


$0

$500,000

$1,000,000

$1,500,000

$2,000,000

65 70 75 80 85 90 95

Age

Por

tfolio

Val

ue

Standard Retirement PlanStandard Retirement Plan

GREAT!I will have sufficient

money for retirement



• The forecast looks fantastic!The forecast looks fantastic!

• Let’s do a Reality CheckLet’s do a Reality Check


Data Source: Dow Jones & Company

10

100

1,000

10,000

100,000

1900 1920 1940 1960 1980 2000 2020

DJIA

1929

Wow!Nice Bull Market!Time to Retire!

Grandfather retires in 1929


$0

$500,000

$1,000,000

$1,500,000

$2,000,000

65 70 75 80 85 90 95

Age

Por

tfolio

Val

ue

1/1/1938

1/1/1929

Grandfather is broke 9 years later!



10

100

1,000

10,000

100,000

1900 1920 1940 1960 1980 2000 2020

DJIA

Wow!Nice Bull Market!Time to Retire!

1966

His son retires in 1966


$0

$500,000

$1,000,000

$1,500,000

$2,000,000

65 70 75 80 85 90 95

Age

Por

tfolio

Val

ue

1/1/1966

1/1/1979

The son is broke 13 years later!



10

100

1,000

10,000

100,000

1900 1920 1940 1960 1980 2000 2020

DJIA

Wow!Nice Bull Market!Time to Retire?

1/1/2000

The grandson retires in year 2000


The grandson will be likely broke

only 12 years later!

Age: 65

Age: 77



• In the real world, it does not matter how accurate In the real world, it does not matter how accurate your assumptions are for your forecast. your assumptions are for your forecast.

• What matters is the What matters is the SEQUENCE OF RETURNS SEQUENCE OF RETURNS that that youyou experience during the early years of experience during the early years of youryour retirement. retirement.


Portfolio Life Depends on Portfolio Life Depends on How Lucky How Lucky YouYou Are Are

10

100

1,000

10,000

100,000

19

00

19

10

19

20

19

30

19

40

19

50

19

60

19

70

19

80

19

90

20

00

DJIA

10.0

20.0

30.0

40.0

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000P

ort

folio

Life,

yrs

Sometimes, you might catch a bullish

trend:You can have

income for 40+ years

More often than not, you don’t catch a

bullish trend:Portfolio lasts about

15 years



• The retirement planning tool that I use, does not The retirement planning tool that I use, does not forecast anything. forecast anything.

• It does not require any assumptions or averagesIt does not require any assumptions or averages

• This new tool only uses the actual market history. This new tool only uses the actual market history.

• This method of planning is called This method of planning is called AFTCASTINGAFTCASTING

• Aftcasting shows you all possible outcomes based Aftcasting shows you all possible outcomes based on actual market history since 1900on actual market history since 1900


Your Retirement Plan based on Your Retirement Plan based on Actual Market HistoryActual Market History



Now, you can decide in a much more informed way: Now, you can decide in a much more informed way:

• When can you retire? When can you retire?

• How much do you need to save until retirement?How much do you need to save until retirement?

• How much you can spend after retirement?How much you can spend after retirement?

• What strategies can you to use for lifelong income?What strategies can you to use for lifelong income?

• How can you export the longevity, market and How can you export the longevity, market and inflation risks to others? inflation risks to others?



OUR GOAL:OUR GOAL:

• To determine your essential and discretionary To determine your essential and discretionary expenses during your retirementexpenses during your retirement

• To figure out when you can retire To figure out when you can retire

• To create a personal pension for your To create a personal pension for your essential expensesessential expenses

• To minimize the luck factor for your To minimize the luck factor for your retirement ageretirement age

• To optimize your current portfolio to maximize To optimize your current portfolio to maximize return and minimize riskreturn and minimize risk



Let’s try this new tool and see how we can plan Let’s try this new tool and see how we can plan your retirement more realistically.your retirement more realistically.

Do you want to go ahead?Do you want to go ahead?


DisclaimerDisclaimer

• Otar Retirement Calculator (ORC), illustrates how a mix of Otar Retirement Calculator (ORC), illustrates how a mix of asset classes (stocks, bonds, cash or inflation indexed asset classes (stocks, bonds, cash or inflation indexed bonds), or income classes (investment portfolio, immediate bonds), or income classes (investment portfolio, immediate life annuity, variable annuity with or without guaranteed life annuity, variable annuity with or without guaranteed income), would have fared under historical market income), would have fared under historical market conditions, given your stated financial goals and your cash conditions, given your stated financial goals and your cash flow. It does not provide a prediction of your ability to meet flow. It does not provide a prediction of your ability to meet your goals; rather, it merely reports the hypothetical your goals; rather, it merely reports the hypothetical outcomes that would have occurred in the past.outcomes that would have occurred in the past.

• ORC should not be used as the primary basis for any ORC should not be used as the primary basis for any investment or tax-planning decisions. Results will vary in the investment or tax-planning decisions. Results will vary in the future. ORC is not intended to predict the future value of future. ORC is not intended to predict the future value of actual investments or actual holdings in your portfolio. It is actual investments or actual holdings in your portfolio. It is also not intended to predict the current and future value of also not intended to predict the current and future value of actual lifetime income.actual lifetime income.


Date post:	17-Jan-2015
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