Four Simple Retirement Planning Tools

Published: April 19, 2014 at 8:17 am

Last Updated on

Whether you are contemplating early retirement or are close to your natural retirement, here are four simple calculators than can answer four important questions:

  1. What is the corpus required for financial independence in retirement?
  2. How long will my retirement corpus last?
  3. How much can I withdraw from my corpus each year?
  4. What is the rate of return required for financial independence?

This sheet is an update to the previously published Excel inflation-indexed annuity calculators

Question no. 4, the rate of return required for financial independence is probably the most important question for any retiree.

If this is too large,

  • for someone heading towards natural retirement, this means that the corpus is too small for active management and an annuity may have to be purchased.
  • for someone seeking financial independence and early retirement, this means a postponement in retirement

When I published the previous version, I was under the impression that the rate of return cannot be determined directly and had to be done using Excels Goal-Seek function.  So I had put in a Macro to do this like I did in the step-by-step guide to goal-based investing

Mr. Raghupathy Masilamani, wrote in suggesting that instead of a macro a simple formula can be used to calculate the rate of return when inflation is involved:

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Return(%) =ROUND(RATE(years,-payment2,corpus2,0,1)*(1+inflation2)+inflation2,2)

I have now incorporated this delightfully simple suggestion. A big thank you to Mr. Masilamani for educating me in this regard.

Download the Excel inflation-indexed annuity calculators

A standard retirement calculator is also included.

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Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com

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4 Comments

  1. Hi Pattu – Thanks for the great calculator. I have used the earlier version before so will give this a good spin. One thing that i noticed right off the bat is that there is no validation for negative entries in the input cells. If that is for simplicity thats alright – the utility of these calculators definitely don’t get diminished by the lack of input validations. Thanks again. Will write back once I have used some more.

    1. Thank you. Yes I did not both to put in checks on negative values. Figured only people who understand the inputs will use this one!

  2. Hi Pattu – Thanks for the great calculator. I have used the earlier version before so will give this a good spin. One thing that i noticed right off the bat is that there is no validation for negative entries in the input cells. If that is for simplicity thats alright – the utility of these calculators definitely don’t get diminished by the lack of input validations. Thanks again. Will write back once I have used some more.

    1. Thank you. Yes I did not both to put in checks on negative values. Figured only people who understand the inputs will use this one!

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