Are You Financially Retirement Ready?

We are frequently asked, “How much do I need to retire?” It is difficult to answer without a lot of buts and ifs and detailed spreadsheets.  So while nothing can substitute for a financial assessment by one of our Wealth Managers, you can use our Retirement Cash Flow Estimator (RCF) to help you gauge your retirement readiness (see graph).  The RCF Estimator uses the life expectancy data for females.[1]  It is an estimate of the present value of a $1 financial annuity ending at age 95 and beginning at the age you select in the graph.  We adjust the $1 annual annuity to account for inflation, mortality, and the time value of money using a recent yield curve for investment grade bonds.[2] Thus, you should think of the RCF value as what the average retiree can expect.

RCF EstimatorThere are two ways to use the RCF value.  One, divide your portfolio value (excluding your primary home equity[3]) by the RCF value nearest your age to estimate the real cash flow (it will increase by the expected inflation rate over your retirement period) the average person can expect in retirement.  For example, say you are 65 and your current portfolio value is $1,000,000.  You would divide the portfolio value by 20.01 from the graph and get $49,975.  This is an estimate of the real pre-tax cash flow a $1,000,000 portfolio would produce through age 95 for the average investor.  At age 95, the portfolio of the average retiree would be drawn down to zero.  If your retirement budget is equal to or greater than the $49,975, you probably need to save more (i.e., work longer) or find ways to cut your retirement budget.

The other way to use the RCF Estimator is to multiply the RCF value by your estimated retirement budget to determine the size of the portfolio the average retiree needs to cover retirement expenses. If your current portfolio value is well above the amount calculated above, you may be financially ready for retirement.  Now you can take the next step and meet with one of our Wealth Managers to perform a detailed financial assessment.

This should be used as a rough guide or starting point to your estimated cash flow in retirement.  It is not a guarantee of any kind nor does it reflect fees and taxes.  As it represents what the average retiree can expect, your results are likely to be different.


[1] U.S. Department of Health and Human Services, National Vital Statistics Reports, 2010. Using mortality data for females results in more conservative estimate of potential cash flow from your portfolio.
[2] Thank you to BlackRock, Inc. for inspiration and similar calculations.  We encourage you to also use BlackRock’s CORI™ estimator at
[3] We recommend leaving out your home equity and consider that a margin of safety in retirement.