Welcome to the site of the Pralana Retirement Calculator.  Financial planning at all levels involves navigation of some forbidding territory, but we’ve designed a family of tools to help you through it.  Whether you’re searching for a free, easy-to-use tool or a sophisticated personal financial model, we invite you to take a closer look at our family of high-fidelity retirement calculators.   Our flagship model, Pralana/Gold, is an advanced personal financial model with unprecedented capabilities for financial modeling, analysis and exploration of what-if’s. This includes side-by-side comparison of 3 independent scenarios analyzed by fixed rate, Monte Carlo and historical methods, investigation of the long-term effects of different withdrawal strategies, interactive exploration of the sensitivity of your plan to changes in key parameters, and much more.  Our free model, Pralana/Bronze, is a personal financial model designed for the person who wants a high-fidelity analysis but prefers to keep it simple.

                                                                                                                                       What users are saying...

From Darrow Kirkpatrick (Caniretireyet.com):“PRC2017/Gold is an incredible value, given the amount of savvy domain knowledge and software skill embedded in this impressive tool. Considering the potential hundreds of thousands of dollars at stake in managing your retirement nest egg, the price seems trivial. Add to that an extensive User Manual (a rarity with any software these days) that can teach you a great deal about retirement planning in itself, and same-day support via e-mail from the extremely knowledgeable developer (also a rarity), PRC2017/Gold is simply a superb analytical tool - arguably the highest fidelity retirement calculator available - and a great value.”

From Mark H., Seattle, WA: “This is an amazing product that I’ve spent hours and hours utilizing to model my situation. I’m on the cusp of 60 and I read everything I see about personal finance (I’m a banker, MBA so I know finance) and 99.99% of the time there is not much new. Your model is the best tool I’ve ever found!”

From Catherine R., Sparta, NJ: “I’m hooked! This is by far the most comprehensive of the 18 retirement calculators I tried and the easiest to use among the detailed ones. I started with the free Bronze version and loved it, so I bought  Pralana/Gold – and they’re in Excel so I don’t need to be online. It allows for impressive detail of inputs and variables, lets you easily test different scenarios, creates great reports, and gives this control freak everything I need. Customer service was prompt and thorough when I had questions. The User Guide is substantial and very useful, including examples. I have full confidence in its results!”

From Dwayne C, Gardner, MA.: “I love this program…so powerful yet fairly easy to use. It has made our retirement planning much more a plan as opposed to a guess. I’ve endorsed it on Darrow Kirkpatrick’s website as well as with friends and relatives.  And frankly, this is without a doubt the best $100 I have ever spent…for the price of a nice dinner out, getting to see where you’ll stand financially in the future based on where you are today…it really is a great bargain.”

Articles on Retirement Calculators

An Optimized Solution for Modeling Account Growth in Retirement Calculators

In February 2017, Darrow Kirkpatrick (caniretireyet.com) posted an article describing a mysterious problem related to the size of the “time step” used by most retirement calculators in modeling decades of a user’s financial future.  He pointed out that most calculators use years as their time step because using days, the time step unit of the real world, is impractical and then went on to elaborate on the potential modeling errors that could result from this design simplification.  This article elaborates further on this issue and the practical solution that we developed in the course of our collaboration on this topic.  Read more...

Retirement Calculator Evaluations

The primary goal in this article is to provide a useful service to individuals in search of DIY tools for financial and retirement planning and, in effect, to separate the sheep from the goats in the multitude of tools offered over the Internet.  A secondary and more personal goal is to discover the good and the not-so-good characteristics of the offerings in the retirement calculator market and apply that new knowledge to the continual improvement of the Pralana Retirement Calculator.  Read more...

Retirement Calculators 201: Growth of Savings

For the sake of this discussion, let’s say that savings accounts come in the following forms:

  • checking or savings accounts that may  generate some amount of interest which is taxed as regular income
  • investment accounts may grow or decline over time depending upon how the underlying investments perform and the growth is taxed as capital gains when withdrawals are made
  • tax-deferred retirement accounts (which may grow or decline over time depending on how the underlying investments perform), such as 401k’s and traditional IRA’s, which are funded with pre-tax money and are untaxed until withdrawals are made, and then taxed as regular income
  • tax-free accounts (which may grow or decline over time depending on how the underlying investments perform), such as Roth IRA’s, which are funded with after-tax funds and whose growth is never taxed

There are some issues that arise when trying to model these savings accounts in a retirement calculator. Read more...

Retirement Calculators 202: Calculating ΔIE

Calculating ΔIE, which is income minus expenses, is a simple thing once annual income and annual expenses are known; however, defining income and expenses involves some complexities and this is where we can find significant differences in the approaches used by the designers of retirement calculators.  Read more...

Retirement Calculators 203: Taxes

 A complicating factor intentionally omitted from the discussion on calculating ΔIE is taxes, specifically income and FICA taxes.  Taxes are an expense, but there is no standard way for treating taxes in the world of retirement calculators.  Here are some of the approaches in use:

  • Ignore them (often with some corresponding text to try to persuade the user that taxes don’t really matter)
  • Ask the user to specify a tax rate and use that to simulate the effect of taxes on income and savings growth (some allow separate tax rates for income and savings growth), which naturally requires the user to determine and enter the correct tax rate(s).
  • Ask the user to specify a tax rate that applies to withdrawals from savings while asking that same user to specify net (post tax) income rather than gross income. This also requires the user to determine and enter the correct tax rate and, further, to use that value to manually convert gross income to net income prior to entering it into the calculator.
  • Perform detailed tax calculations and ask nothing of the user.

Read more...

Retirement Calculators 204: Keeping Track of Your Savings

 If the calculator treats all savings as one common pool and simply doesn’t try to model the unique characteristics of separate types of savings, then all it has to do is add annual ΔIE to the old balance to get the new balance.  A subset of these calculators recognize that withdrawals from savings can be a taxable event and apply a tax burden on all withdrawals based on the user-supplied tax rate.

The calculators that manage the various savings accounts separately must deal with considerably more complexity than those that model savings as a single pool of money. Read more...

Retirement Calculators 101: The Basic Formula and a Definition of Terms

This is a detailed, top-down technical article on retirement calculators.  It has been prepared by the designer of the Pralana Retirement Calculator but it is written objectively and will not get into the subjective business of suggesting “the best retirement calculators”.  Armed with the knowledge presented in this article, you will be equipped to assess for yourself the goodness of a retirement calculator and the extent to which it can be trusted to provide accurate and/or useful information, and then determine which one (s) might be “best” for YOU. 

Retirement calculators are about one fundamental thing: they create a long term prognosis of your financial health based on certain assumptions and then allow you to change some or all of those assumptions to observe the effects on that prognosis.  Here, in the simplest mathematical form possible, is the formula for creating that prognosis:

Long term prognosis = initial savings + growth of savings + deposits to savings – withdrawals from savings, projected out over your lifetime. The terms of this formula are defined as follows:

  • Initial savings is the amount of money currently in your accounts.
  • Growth of savings is the interest and dividends earned on your accounts and the growth (or loss) on the investments you’ve made with your money.
  • Deposits to savings are the new money that will be added into your accounts in the future, including the liquidation of real property.
  • Withdrawals from savings are the money taken out of your accounts to cover negative cash flows whenever your expenses exceed your income.
  • Projections are the year-by-year additions to and subtractions from your savings for some number of years to create the long term prognosis.

Read more...

Retirement Calculators 301: Sensitivity of Long Term Projections to Simplified Accumulation Phase Modeling

This discussion is moot if you’re already retired or quickly approaching retirement.  Otherwise, it might be pertinent to you.  The reason it matters is that the accuracy of your portfolio estimate at the start of your retirement is a function of how accurately your accumulation phase is modeled.  Inaccuracies in this estimate will then be magnified over the distribution period because of the law of compounded returns.  Read more...

Retirement Calculators 302: Determining Retirement Income Requirements

This is another area where we can differentiate low fidelity from high fidelity calculators.  Many calculators only allow expenses to be defined by a single summary-level value while others allow for expenses to be defined to whatever level of detail the user desires.  Some of the latter category of calculators go so far as to model college educations, home mortgages and other property-related expenses, healthcare expenses that vary greatly from early to late retirement, one-time expenses, and so on.  Clearly, the first group of calculators belongs to the low fidelity category while the second group meets at least one important criterion for a high fidelity calculator.  Read more...

Retirement Calculators 303: Sensitivity of Long Term Projections to Tax Handling Approach

You may be of the opinion that it’s a waste of time to attempt to model taxes because we don’t know what Uncle Sam is going to do to tax rates in the future.  I believe the correct approach is to use the best information available (i.e., the current tax code) to establish a baseline plan, supplement that with a sensitivity analysis based on potential future tax increases, and then revisit your analysis from time to time to make updates based on any new information that has become available.

With that said, retirement calculators generally fall into one of three tax-handling categories: 1) those that perform detailed tax calculations, 2) those that account for taxes based on user-specified tax rates and 3) those that ignore taxes.  If you go with one of those that perform detailed tax calculations, you simply do not have to concern yourself with taxes and can be reasonably confident that they’re being accounted for accurately.  If you go with one of those that estimate taxes based on user-specified tax rates, then you have to accurately determine the proper tax rate to use and how it might vary over time and enter that into the tool, knowing that most tools only accept a single rate that applies to the entire modeling period.  Finally, with the set of tools that ignores taxes altogether, you can either choose to ignore taxes yourself, or you can figure your tax rate and then manually adjust your income and expense inputs to the tool to account for taxes.  Read more...

Retirement Calculators 304: Sensitivity of Long Term Projections to Pooled vs Specific Savings Accounts

Previously, a question was posed on whether it makes a significant difference whether a retirement calculator models savings accounts separately according to their unique characteristics or simply models them as a common pool.  The test case described in this article, involving only the distribution phase, is enlightening.  Read more...

Retirement Calculators 305: Ease of Use Issue

Most free retirement calculators are truly easy to use once you’ve done your homework and have translated all of your financial details into the form they’re expecting.  This commonly boils down to annual contributions to savings, annual income during your retirement years and when it will begin, your retirement income requirements (i.e., retirement expenses), tax rate, rate of return on savings, inflation rate and life expectancy.  Armed with these numbers, it’s usually a simple matter to plug them into the calculator and get quick results.

Retirement calculators do the math that integrates the data described above into a long term projection.  That’s difficult for most people to do on their own and, hence, retirement calculators can be useful tools.  The rest of the story, though, is the downside of the statement “once you’ve done your homework and have translated all of your financial details into the form they’re expecting”.  This article explores the rest of the story.  Read more...

Retirement Calculators 306: Analysis Methods

Once your data has been entered, the tools will use it along with a set of assumptions (default or specified by the user) to form some sort of view into the future to enable assessment of the plan over the long haul.  There are a variety of methods employed by retirement calculators to form these projections, but the primary methods are fixed rate, Monte Carlo and historical analyes.  All have their strengths and weaknesses, and none are perfect.  Read more...

Retirement Calculators 307: Unknowns and Risks

No calculator can forecast the future with certainty because the calculations are always based on assumptions related to certain variables that are unknowable in advance, and this translates into some degree of risk in relying on their predictions.

Topping the list of unknowns are:

  • Inflation rate
  • Future performance of your investments
  • Your lifespan
  • Government policy changes

These unknowns translate into retirement planning risks, and some retirements calculators are more adept at helping you address these risks than others.  Read more...

Retirement Calculators 401: Life Cycle Models

We’re all affected by things beyond our control, such as inflation, government policy (e.g., tax rates, Social Security benefits), the rising cost of healthcare and the volatility of certain investments. But we also face many decisions in life which are largely under our control. We weigh the pros and cons, make trade-offs, and try to assess how one decision interacts with other decisions.  This includes job and career, getting married, having children, college educations for your children, housing choices, mortgages, how much to contribute to retirement accounts and what type of retirement accounts to have, healthcare, how much life insurance to carry, getting a divorce, when, where and how to retire, when to start collecting Social Security benefits, which survivor benefits to select with your defined benefits pension, long-term care, and on and on.  The decisions we make on many of the above items have a direct bearing on our income stream and our taxes which, in turn, affect our discretionary spending power.

Without the right tools, putting all the pieces of the financial puzzle of our lives together is bewildering if not impossible. Read more...

Retirement Calculators 402: Consumption Smoothing

Consumption smoothing is a term used by economists to describe a consistent standard of living for an individual regardless of family size and the ebb and flow of non-discretionary expenses.  In other words, it enables you to maintain the same level of discretionary spending (i.e., consumption) while you’re raising a family, paying your mortgage, paying for college educations, when you become empty nesters and when you’re retired.  The rare tools with the capability of performing consumption smoothing can be very helpful in making lifestyle decisions, but you have to be careful in determining the level of trust to place on consumption-smoothed expenses.  Read more...

Retirement Calculators 403: Personal Financial Models

So, finally, I’m going to introduce the concept of a personal finance model (PFM) and then attempt to explain the power and convenience that such a tool can provide.  A PFM should not be confused with personal finance software because those products tend to be money management and tax preparation tools.  A PFM should be like a trusted friend that you can go to with virtually any issue.  Read more...

Retirement Calculator Fidelity

As a designer of retirement calculators, I’ve spent a good deal of time looking at the competition.  One thing has become abundantly clear as I’ve gone through this process:  some calculators are serious tools while others are useful only for providing a quick-and-dirty look at retirement plans.  For the sake of evaluating and discussing retirement calculators, I believe a useful discriminator is the concept of calculator fidelity.  Wikipedia’s definition of the term “fidelity” as it relates to this subject is as follows: “The degree to which a model or simulation reproduces the state and behavior of a real world object, feature or condition.  Fidelity is therefore a measure of the realism of a model or simulation”. Read more...

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