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The "Magic Number"

There are a number of calculators on the internet that will allow a future retiree to punch in the numbers to see if they have enough money to retire. You can find some of them at this link: http://moneyover55.about.com/od/preretirementplanning/a/retirementcalcul... The problem with most of them is that it is difficult if not impossible to make an accurate projection of how well your investments will do for even a short period of time, much less for decades. I have checked out many of them, but one of my favorites is the Monte Carlo calculator. While it was comforting to know that our money would last in normal economic times, I wanted to know what would happen in a worst case scenario. Our nightmare was that the economy would take a long term turn for the worse and we would run out of money before we ran out of time. The Monte Carlo calculator allows you to input such information as your age, the value of your investments, how much money you plan to take out each year, and when you plan to start the withdrawals. The calculator will then run simulations modeling 10,000 possible outcomes over your lifetime and produce a “probability of success.” That number represents the percentage of times in the simulation that your money lasted longer than you did. Obviously, the higher the percentage, the better. The calculator helped assure us that even in the worst of times, there was a excellent chance that our money would outlast us. I would like to write more about the calculator in future posts but consider it one of the best tools available for those who want to retire early with a strong sense of security. You can check it out here: http://www.flexibleretirementplanner.com/wp/

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