Presented At
NYU Optimal Retirement Withdrawal Strategy Conference
May 2008

White Papers

The Use of Historical Averages

A Critique of Monte Carlo Retirement Calculators

Optimal Retirement Withdrawal Strategy

The Optimal Retirement Planner

The retirement calculator that optimally schedules retirement savings and withdrawals to maximize the amount of money available for spending throughout retirement.

ORP is decision support Internet based computer software built using the tools and techniques of Operations Research.
Questions Decisions

When will my retirement money run out? How much do I save?

Will there be enough to live on if I withdraw 4% of my assets annually? In which accounts?

Am I underspending to preserve assets? When do I do partial IRA to Roth IRA rollovers?

Should I take out a reverse mortgage?

When do I start taking Social Security?

Should I continue working after retirement?

The Big Picture of Retirement Financial Planning

Before Retirement

The Miracle of Compounding	Investments give off returns which are reinvested, which then give off more returns. The earlier the investment the more money for retirement.
Optimal Savings Schedule	ORP selects the optimal mix of savings accounts and amounts to fully exploit its optimal retirement withdrawal strategy.

After Retirement

Compounding Continues	Even after retirement, when contributions stop and withdrawals begin, the portfolio continues to grow for some years thanks to compounding.
Inflation	The wrecker of retirement plans. The good news is that Federal fiscal and monetary policies are providing price stability.
Taxes	The graduated personal income tax on tax-deferred withdrawals sometimes challenges the conventional wisdom of withdrawal strategies.
Optimal Withdrawal Strategy	ORP maximizes after-tax retirement spending by optimally scheduling retirement account withdrawals.

Taxonomy of Retirement Calculators

Google Retirement Calculator and over 2 million hits are returned. These retirement planning calculators can be characterized as retirement calculators that compute:

The year the money runs out. (The great majority)
How much to save between now and retirement. (Offered by Mutual Funds)
The rate of return retirement assets will have to produce for a comfortable retirement. (Really portfolio management)
The probability that retirement goals can be met. (Monte Carlo Method)
The amount of that will be available for spending throughout retirement. (Optimization)

The last class has only one member -- The Optimal Retirement Planner (ORP). This is because ORP is more than a calculator; ORP is a linear programming optimizer.

Definition: Optimization - a mathematical technique for finding the maximum of a function of many variables subject to a set of constraints. To put it another way; optimization is the selecting of a small set of activities, from a very large universe of possible activities, that makes the most money without breaking the rules

ORP offers insights into both phases of the retirement cycle:.

Before retirement ORP schedules savings to the various accounts and demonstrates the growth, through compounding, in retirement plan value.

After retirement ORP maximizes the after-tax money available for spending during retirement by optimalling scheduling withdrawals from the various accounts.

ORP does not ask for estimated annual expenditures (the big wish). Instead, ORP shows how much inflation adjusted, after-tax money will be available for spending each year.

is a retirement planner like no other!

ORP maximizes retirement cash flow from investment returns and drawing down the account's capital to a given estate level at the end of the plan. ORP's linear programming optimizer maximizes the after-tax cash available for spending during retirement by modeling compounding investment returns, inflation, income taxes and minimum withdrawal requirements.

Everyone needs to do retirement planning!

	1961-1981 Max out that 401K!
	1943-1960 Early Retirement?
	1925-1942 Into Retirement.

ORP is supported by Sundown Software Systems which provides the linear programming model formulation and optimization software. Sundown Software Systems and James S. Welch, Jr. are not engaged in the sale of financial products or services.

Use of the ORP optimizer is free and private. ORP is available for use without warranty of any kind.

We ask that you tell us how you heard of ORP and contribute your opinion about this site by sending us an e-mail at orplanner@gmail.com

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