Did you know that in AARP’s 2023 Retirement Confidence Survey, nearly half (49%) of retirees said their overall spending was higher than expected when they first retired? This is up from 36% in 2022. Traditional retirement planning apps assume consistent withdrawal throughout retirement, but they cannot address realistic needs in the modern day. Real-life expenses can vary significantly at different stages of life. Not being aware of these variations can lead to overspending. To address this, I’ve developed a FREE retirement planning app, DynaRetire. that considers these variations, allowing retirees to strategize based on changing needs.
The Challenges of Traditional Apps: Missing Realistic Expense Changes Consideration
When examining other retirement planning apps, many tend to oversimplify or rely on rigid financial models that don’t reflect real-life scenarios. These tools often use rigid models that assume consistent withdrawals, a fixed inflation rate, steady investment returns, and a standard lifespan.
Why do Realistic Expense Changes Matter?
But let’s be honest—expenses change at different stages of life, like higher medical costs in old age, and everyone plans their spending differently, such as budgeting more for travel early on and less later. Balancing a desired lifestyle while acknowledging potential risks is critical to achieving a fulfilling and secure retirement (please visit Planning Retirement Money for A Fulfilling Life to get some ideas). Retirement planning needs to be flexible to reflect these dynamic realities.
Below is a sample of expense changes:
Introducing a Practical App for Dynamic Retirement Planning Reflect Realistic Expense
If you need a more accurate financial picture or prefer flexible planning, it’s wise to consult a financial planner. Calculations can get tricky, especially when they involve investments or planning for early retirement.
While this app doesn’t replace a financial planner, it is valuable for helping with calculations that adapt to real-life financial behavior. It offers a reflection and projection of your financial future, enabling better planning.
Additionally, while you may want to play around with the adjustment number here and there to find the right balance of your overall budgets among the expenses or simulate various kinds of “what if” situations, the app provides a flexible framework to tailor financial strategies to your unique circumstances. Notably, it highlights the significant impact of higher initial expenditures.
Other Unique Features of DynaRetire: Earlier Retirement, Bucket Strategies
In addition to addressing realistic expense changes, DynaRetire includes specialized features for early retirement planning and investment back-testing.
It offers back tests against index funds and strategies like minimum spending thresholds and bucket strategies with withdrawal sequencing and load balancing, according to your asset allocation selection. You can set these strategies in different age periods aligned with your risk appetite.
How DynaRetire App Addresses Retirement Planning More Accurately
| Other Retirement Tool | DynaRetire Simulator Tool | Why is this important For Real-Life Scenarios |
|---|---|---|
| Flat Withdrawal Model: Assumes a constant amount withdrawn each year. Flat Inflation Rate: Applies a single inflation rate to all expenses. Start from Year 1: Begins calculations from the first year of retirement without flexibility. | Diverse Inflation Rates: Assign different inflation rates to each expense category. For example, medical costs can have a higher inflation rate while fixed payments remain constant. Dynamic Expenses: Specify varying amounts for different age brackets, with start and end periods for each expense. Interval Expenses: Manage periodic expenses, like car replacements or major home renovations, occurring every 10 years. | In reality, people’s spending habits and plans differ greatly. Here’s how my app addresses these variations: Early Retirement Spending: Many people clear debts or spend more on travel and renovations early in retirement, which can deplete funds faster than a flat model suggests. Medical Costs: Medical expenses often increase significantly with age due to high medical inflation, a factor often underestimated until it’s too late. Gifts and One-Time Payments: Some may choose to give substantial amounts to their children at specific ages. Fixed Payments: Installments or insurance premiums are fixed and may have an end period, which needs to be accurately reflected in the plan. Periodic Expenses: Planning for big-ticket items like car replacements every 10 years impacts finances more than spreading the cost evenly over a decade, due to varying inflation rates and opportunity costs. DynaRetire app dynamically projects expenses by applying effective inflation rates each year, based on individual expense categories and their timing. This ensures a more accurate and realistic financial projection tailored to your unique retirement needs. |
| Single or Dual Income: One income for savings, one for pension. Flat Growth Rate: Assumes a consistent growth rate over time. Start from Year 1: Begins calculations from the first year of retirement without flexibility. | Customizable Income Growth: Adjust growth rates for each income source, including periods with no growth if needed. Flexible Income Timing: Plan for incomes to start and end at different times, or even continue indefinitely. Directed Income Allocation: Direct each income source to specific funds like index funds or pension funds. | In Real Life: Income Variability: Your earnings might grow quickly at first, then slow down or become stagnant. This applies to salaries and rental incomes. Future Income Sources: You might have future income, like payouts from an insurance plan upon maturity. Ongoing Income: You could have income before and after retirement, such as rental income. Planning for the Future: Retirement Contributions: If you're adding to your pension and investments now, you want to see if it will be enough later. Directed Income Allocation helps with this. Property Sales Impact: Selling a property in the future could significantly impact your financial plan: Rental Income: If you sell a rental property, you'll need to account for the loss of that rental income. Expenses: If the sold property is your residence, you might need to account for new rental expenses or the cost of buying a new home. Reinvestment: The proceeds from a property sale might be reinvested differently. You might allocate more to safer investments and less to riskier funds, which could alter your overall return rates. Asset Allocation: You may choose to reset your asset allocation after a property sale, directing more funds into safer investments to reduce risk. This means your portfolio might grow larger but at a lower return rate compared to before the sale. DynaRetire app helps you project income growth, amounts, returns, and their timing without the need for complex calculations. It’s designed to fit your unique financial situation, giving you a clearer picture of your future, with the app takes into account the real complexities of life, including major decisions like property sales and their financial impacts. |
| Lack of Investor Focus: Often don't cater to specific investor needs, or focus solely on investment portfolios with simple withdrawal models. | Optional Investment Features: Tailored for individuals incorporating investments into their retirement planning. Retirement Simulation: Test your plan against historical market conditions. Simulate Minimum Spending: Switch to minimum spending levels (decided by you) during bad markets. Bucket Strategy Simulator: Test if withdrawal sequence and load balancing with a pause option during bad markets. Custom Asset Allocation: Set preferred asset allocation for different life stages. | Understand how your retirement plan holds up during market crashes using historical data. This helps gauge your comfort level with potential risks. Stress Testing: The app helps you understand potential risks and assess your comfort level with your retirement savings by using stress test scenarios. These scenarios consider minimum spending and the bucket strategy, which sets withdrawal sequences, adjusts fund balances based on your asset allocation that can change over time according to your risk appetite as you age, and pauses rebalancing during downturns Historical Context: While the market is unpredictable, the app's simulations based on historical data offer insights into how effective load balancing and pause options might be. With considers income, expenses, and investments together. This integrated approach reflects real-life financial dynamics, helping you see the complete picture of your retirement readiness knowing you have considered various scenarios and strategies. |
| Lack of Early Retirement Support: Do not tailor for earlier retirement planning. | Supports Early Retirement Planning: Includes withdrawal age eligibility as a critical factor and simulates the risk of non-pension fund depletion. | Timing of Withdrawals: Ensure you have enough savings to sustain you until you can access your pension funds. Simulating Depletion and Impact: The app simulates the risk of non-pension fund depletion and its impact on return rates, helping you understand the potential outcomes of your early retirement plan. Possible Lower Return Rate With Risk Management:Before you are eligible to withdraw from your pension fund, it cannot serve as your safer investment. To mitigate the risk of an unpredictable market downturn before you can access your pension, consider allocating some of your investment money into safer funds. This approach may lower your overall return rate compared to previous expectations DynaRetire helps you create a realistic financial plan for early retirement, addressing the timing of withdrawals and the need for a balanced investment strategy. |
Overcoming Key Retirement Challenges: Balancing Finances, Lifestyle, and Unexpected Costs
Feeling-Based Decisions: Many retirees rely on feelings rather than data when planning their spending. This can lead to overspending or underspending, affecting their quality of life.
Math Alone Isn’t Enough: While mathematical calculations are essential, they often focus on survival rather than fulfillment. Flat withdrawals from some apps may not optimize the retirement experience.
Optimism and Risk: Optimism affects risk tolerance. Some retirees underestimate risks. Balancing optimism with prudent planning is crucial.
Immediate vs. Future Needs: Prioritizing current desires (like travel) without considering future needs (like medical expenses) can lead to imbalances.
This app aims to address these complexities by providing personalized financial simulations. It helps replace ‘should be ok’ with a clear, adaptable, flexible strategy.
You can explore various ‘what-if’ situations to understand potential outcomes. Retirement planning is an ongoing journey of adjustments and fine-tuning, ensuring you can live your retirement fully, with confidence and control over your finances..
Who Is This For
- Working people who are starting to save for retirement well before retirement age.
- Working people are uncertain about retiring at 55 or considering postponing it.
- Working people are contemplating a switch to a job that pays less but brings more happiness and wonder if they can still afford to retire.
- Working people are planning to retire earlier than the traditional retirement age.
- Retirees who want to change their plans due to the evolving needs or new realizations about how they want to live their lives.
- Retirees who are worried about living comfortably if their retirement income grows slowly or stops too soon.
- Retirees who wish to ensure their retirement savings are on track.
- Investors are concerned about their retirement funds lasting long enough, especially during market downturns.
From Planning to Practice: Creating the DynaRetire App
Personal Experience and Real-Life Insights
I’ve been down the road of retirement planning, starting 10 years before I retired. I kept tweaking my plan based on new insights and learnings. When the market fell soon after my retirement, my knowledge of bucket strategies helped me mitigate the risk and manage my finances effectively. This experience taught me the importance of risk management.
My experience led me to create the DynaRetire app. It shows real-life spending patterns, considers market changes, and provides closer retirement projections for your needs. Both individuals and financial professionals can benefit from this.
Below is the Excel file I used for my calculations in the past. I also used this file to develop the app, with more flexibility and added features (income and varied growth).
A Practical App for Real-Life Scenarios
Instead of writing a book, I decided to make a free app. Seeing real numbers helps you understand your situation better. Books can’t always show how different scenarios might work out, but numbers can. I hope this app, built from my knowledge and practical experience, with essential flexibility and features, can adapt to the real-life situations you might face in retirement. I want this app to help you prepare for your unique circumstances. However, when you retire, you must still consider real-world conditions to make informed financial decisions.
Below is the Excel file generated from the app. It is intended to create results instead of displaying them on the screen so you can have a copy for your reference. You may use the number for further calculation or to generate a graph. The data in Excel does more than display on the screen.
