41 Questions Answered About A New, Simple, And Inexpensive Retirement Income Planning Spreadsheet App edit
Friday, February 28, 2014 15:28

David Zolt is making an important contribution to the way financial advice fiduciaries will engage in retirement income planning. I’ve been producing weekly educational webinars for financial advisors for 5½ years and rarely have I seen such engagement from users in a new idea.

Zolt’s $49 a year retirement income planning spreadsheet app generated far too many questions to answer at a recent webinar. Below Zolt answers questions about his app. The questions from attendees shows Zolt is getting mental mindshare from professionals. The sheer number of questions and their specific nature indicates Zolt is on to something.  

The bigger picture is what intrigues me. Zolt is a one-man software company and he stands to get wide penetration among fee-only CFPs.  A one-man-shop now has the potential to disrupt the wealth management software business. That’s amazing. Below are Zolt’s answers to questions from attendees of the recent webinar.

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In the worst-case scenarios, they could go as much as 5 to 10 years in a row without an inflation increase, which is a major hit to their purchasing power (especially during high inflation periods), correct?  How do you help clients understand the potential impact to their lifestyle?

The number one message I make sure to get across to clients is that the stock market will go down a lot someday and when (not if) it does, they need to stay invested.  If they are not prepared to stay invested in a down market, then they shouldn’t invest in the stock market.  Panic selling when the market is low is the biggest risk to a client’s retirement plan withdrawal strategy.

The worst-case scenario is when the client outlives their money.  If you want to be 100% confident of not outliving your money, your initial withdrawal rate would have to be about 2% or less.  Withdrawal strategy is about balancing risks.  The Target Percentage technique allows you to take a higher initial withdrawal by shifting some of the ruin risk to purchasing power loss risk.

As I said in my presentation, I don’t recommend raising issues like this with clients.  If the client raises the issue of purchasing power 10 or 20 years from now, I would address it head on and in as much detail as needed to answer the client’s questions, but only if they raise the issue.  In my experience, the vast majority of clients don’t want to think through all of these complex issues, but they do want to be confident that you understand these issues.


I like this approach. Does seem easier to grasp than probability. Could you please elaborate on the statement that "90% confidence does not mean a 1 in 10 chance the plan fails"? I thought that's what it does mean.

Most clients don’t understand how to interpret retirement planning results stated in probabilities.  When you tell a client that they have a 90% chance of running out of money, they think it’s like rolling dice.  What I’m saying is that a 10% chance of failure is not random.  A 10% failure represents very difficult economic times for the whole country and the whole world.  Everyone else around you would be in the same predicament.


Is Monte Carlo used in the calculation forecasting?

The Retirement Planner spreadsheet does not perform Monte Carlo simulations.  Monte Carlo simulations are built into the safe withdrawal rates in the Success Probability Table.


Can basic portfolio assumption 60/40 and sub categories be changed? Can portfolio allocation be changed?

The Retirement Planner spreadsheet does not explicitly treat asset allocation.  However, you can change the withdrawal rate targets in the Success Probability Table to reflect your asset allocation.  My research indicates that safe withdrawal rates for asset allocations of 60/40, 50/50 and 40/60 are almost the same.


To confirm the living expenses in the spreadsheet. Is the gross number needed to live on then the tax amount calculated and reduced as an expense?  Please confirm.

The spreadsheet requires you to input the client’s living expenses in retirement excluding income taxes and an effective income tax rate.  From these 2 inputs, the spreadsheet calculates living expenses in retirement including income taxes.  The Retirement Planner spreadsheet does not do a detailed tax calculation.  I recommend that you have a detail tax calculation prepared for the client in retirement and input the effective tax rate into The Retirement Planner that results in the correct amount of tax.


Are Social Security benefits inflated in future years?

The Retirement Planner applies the Social Security increase/decrease factors for late/early retirement automatically depending upon the Social Security benefit commencement age.  However, The Retirement Planner does not apply COLA increases.


Income taxes can be a large amount and is difficult to calculate. Taxable account (cap gains, dividend), Roth IRA accounts, traditional retirement accounts.

Yes.  In order to properly prepare a retirement plan for a client you must know their tax situation.


Do you consider age?

Yes, take a look at The Retirement Planner spreadsheet.


What about the client that retires at age 62. Should they take social security at age 62 and leave taxable investments alone, or vice versa?

The Retirement Planner can be coded to compare different Social Security starting strategies, but it was not designed for that purpose.  I recommend using software designed for that purpose.  The Retirement Planner was designed to quickly and easily allow financial planners determine when their clients can retire with a safe withdrawal rate.


I like this worksheet a lot.  Thanks.  I don't like the tools out there either, and I created my own spreadsheet.

Thanks for your comment.  Most retirement planning software is too complicated, too hard to use and too hard to understand and explain to clients.  Many financial planners I’ve worked with have attempted to build this type of spreadsheet themselves and have shown me their various creations.  Ultimately they say “I like yours better” and then buy it.


How about both Wade Pfau and David Zolt on the same webinar? Let them duke it out (in a good way) over safe withdrawal rates, since Wade has been warning about anything over 4% being potentially dangerous going forward.

I would participate.


Is there a place for client to sign off to show that you, as the advisor, are recommending the client retire in year “X”— to cover ourselves?

You can print out the final retirement plan and both you and the client can sign it.


If I buy two licenses, is it easy to get the data from desktop to laptop?

Yes, very easy.  You can copy the spreadsheet (with the data in it) from one computer to another computer as long as you have a license on both computers.


How can we utilize these spreadsheets in our practices?

The Retirement Planner is used to create retirement plans for clients by quickly and easily determining when the client can retire with a safe withdrawal rate.


Can you print out the report for client?

Yes, you can print both the spreadsheet and the graph.


Can we brand the spreadsheet?

Yes, cells F1 through T1 on the Main Calc Page are unprotected and you can put your company name and logo there.


Can you have this on any computer...i.e. desktop and laptop if you go to client’s house?

Yes, you can copy the spreadsheet (with the data in it) from your desktop and open it on your laptop and vice versa as long as you have a license on both computers.


Is there a video to go over how this spreadsheet works?

The best video currently available that demonstrates The Retirement Planner is a replay of the A4A webinar.


Do you charge a fee for this service or do you include the retirement planning/projection with money management

I include retirement planning as part of my comprehensive service, but you are free to charge as you wish.


I believe a huge omission is the COLA adjustment. Also can you adjust spending by various factors each year?  In other words, an unequal inflation rate.

Inflation is built into the safe withdrawal rate.  Also, you can inflate living expenses by putting the annual percentage increase factor in cell E23.  This increase factor cannot be varied from year to year.  Also, you can enter one-time windfalls or expenses such as temporary/part-time income, inheritances, land sales, college expenses, etc. in the yellow cells in row 7 of The Retirement Planner spreadsheet labelled Additions/Subtractions.


There is no deferral credit on a spousal benefit for social security?  Why would Mary's social security benefit increase?

The Retirement Planner spreadsheet assumes that the spouse’s benefit is based on the spouse’s earnings and would, therefore, be entitled to a deferral increase until age 70.  If spouse’s benefit is based on their spouse’s earning you should make an adjustment if the spouse defers their benefit past Social Security Normal Retirement age.


Oh, I see -- she's taking it later than 62, not 66.  Sorry.



Case study #4: how do you account for unexpected expenses, such as medical or credit-related losses, etc. They started w/ $350K and could retire within 10 years under the example but how would you factor in the unknown when discussing with client?

The yellow cells in row 7 of The Retirement Planner spreadsheet labelled Additions/Subtractions is for one-time windfalls or expenses such as temporary/part-time income, inheritances, land sales, college expenses, etc.


Are social security input numbers on spreadsheet in today's dollars or future dollars?

Today’s dollars.


How do we buy it?

Go to


This looks simple to use... what is the learning curve for us non-EA?

The learning curve is very fast.


Does Annual withdrawals make a difference versus monthly?

Not in my opinion.


Love this and interested in whether following questions overcomplicate it: What about going from full to part time work?

The yellow cells in row 7 of The Retirement Planner spreadsheet labelled Additions/Subtractions can be used for one-time windfalls or expenses such as temporary/part-time income.


What about varying expenses over retirement period?

The Retirement Planner spreadsheet cannot vary expenses over retirement period.  It’s built on the concept of safe withdrawal rates, which assume inflation-adjusted withdrawals over the retirement period.


Will the spreadsheet run on Apple computer, if I already have Excel for Mac?

The Retirement Planner requires Excel 2000 or later and Windows 2000 or later.  Mac users can install it if they have a way to run Windows (e.g., Parallels Desktop, VMware Fusion, Boot Camp, etc.) with Excel.


I missed your views on Monte Carlo analysis. Do your spreadsheets incorporate that technique, and if not, why not?

The Retirement Planner uses the knowledge gained from Monte Carlo-based safe withdrawal rate research without the need to perform complex and cumbersome Monte Carlo calculations.  In my opinion, it’s overkill to run Monte Carlo simulations on individual clients.


Would you not have to re-evaluate annually especially after a significant loss in their portfolio?

I recommend doing an annual update/review using The Retirement Planner.


Does the spreadsheet take account of RMD's?



You don't take into consideration the fact that many people spend less in the last years of their retirement. Any way of reading that too in your spread sheets? (They don't need to retire with a larger portfolio than they started out with)

Yes, I do take this factor into account.  In my January 2013 Journal of Financial Planning article about the Target Percentage I made the argument that retirees spend less in their later years and cited 2 articles to support that premise.  In other words, this phenomenon is built into Target Percentage technique.


Who will update once he retires or dies?

I recommend doing an update/review using The Retirement Planner when circumstances change significantly including retirement or death.


Is there a way to adjust the income tax rate number in the future as taxable income increases or events that place more taxable income in the equation?

No, the assumed tax rate that you input is used for all years.


The Success Probability Table seems to rely on the 4% rate, rather than the 6% with the Target Percentage Test.  Correct?

The Success Probability Table in The Retirement Planner is my subjective combination of the traditional 4% safe withdrawal rate and my Target Percentage Test technique.  That’s why 5.5% to 5.9% is considered OK.  This range would not be considered OK under a traditional 4% safe withdrawal rate.

Please note that you can change Success Probability Table to reflect whatever philosophy you may have regarding what is a safe withdrawal rate.


Is the initial withdrawal rate applied to the beginning balance of each year, or just to the balance at retirement to determine each year's withdrawal?

I don’t know the context of this question, so I’m going to assume it’s about how safe withdrawal rates are determined.  The initial withdrawal rate is applied to the beginning balance in the first year of retirement.  For traditional safe withdrawal rates, withdrawals in subsequent years are assumed to increase by inflation.  For the Target Percentage Test technique, subsequent withdrawals are assumed to increase by inflation only if the Target Percentage Test is passed.  If the Target Percentage Test is failed in any year, the withdrawal for that year is the same amount is the prior year (i.e., no inflation increase)


Does this only project for a 30 year retirement?

The default Success Probability Table is based on a 30 year retirement, but you can change the default Success Probability Table to fit your specific situation.


Are you assuming that the withdrawal is done using systematic withdrawals (selling shares) as opposed to the cash reserve strategy or bucket approach?

The Retirement Planner is not specific to any particular asset withdrawal/liquidation strategy.  The Retirement Planner determines when a client can retire safely by targeting safe withdrawal rates.


Slide 12:  When looking at Sequence Risk, I'm interested in knowing whether the portfolio(s) you modeled assumed the withdrawals came directly out of the stock/bond portfolio.  OR, did they include one to three years of cash on hand to cover living and lifestyle expenses?  Many planners I know tend to set up buckets of cash to help mitigate against this risk.

The projection methodology used in my January 2013 Journal of Financial Planning article about the Target Percentage is the same as most other retirement research articles appearing the Journal.  That is, withdrawals were assumed to be taken at the beginning of each year and the portfolio was assumed to be rebalanced at the beginning of each year.



A New Voice In Retirement Income Planning: David Zolt, An Actuary, Financial Planner And Software Entrepreneur, Gets A Strong Reaction From Advisors Who Attended This Webinar edit
Saturday, February 08, 2014 12:41

Judging by the number of comments and their intensity (see below), members of Advisors4Advisors who attended Friday’s webinar connected with ideas about retirement income planning from David Zolt.
A math whiz, who spent 25 years as an actuary consulting to many of the world’s largest defined benefit and other retirement plans, Zolt captured the interest of advisors with his simple but powerful new spreadsheet app for finding safe retirement withdrawal rates.

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Zolt’s software represents a trend unfolding in advisor technology toward more specialized apps. I call them “crack apps” because they fill in the cracks in an advisory practice.
Crack apps are causing leading-edge advisors (i.e., A4A members) to redesign their desktops and add new tools to their existing toolset. Crack apps do one thing great, which differs from the current tools advisors use for financial planning.  In contrast to the comprehensive apps for solving financial planning problems that require much more data input, crack apps give you an answer to a very specific problem and require much less data input.
Zolt’s safe withdrawal calculator is a really simple spreadsheet that Zolt’s designed to solve a complicated retirement income problem quickly. You can use it in front of clients and print out the graphical reports. Though you don’t input as much data as you would using a planning program, you get a very good solution to retirement income questions all clients must answer in minutes for $49 annually (after a $99 first-time fee).  
Retirement income planning over the past decade has been greatly influenced by the research of a small group of thought leaders, including William Bengen, Jon Guyton, Michael Kitces, Wade Pfau, and Manish Malhotra. Reaction to Zolt’s webinar indicates he may be a join that group of thought leaders.   
  • I will look at this software more closely. It looks like a good tool.
  • Confusing presentation. More clarity by the presenter is needed.
  • Very interesting
  • Good. Software not detailed enough for me. Taxes can be a large future expense.
  • Good stuff. Considering purchasing the software.
  • Good.
  • Very glad I was able to attend today...Great tool
  • Looks like a simple way to illustrate the pros and cons of different retirement income withdrawal levels, but it won't replace more robust financial planning systems for most clients
  • Our firm uses Monte Carlo software and produces an understandable report from the calculations for the client as a takeaway. While we may not be interested in acquiring the software at this time, we will definitely be following David's work.
  • This was a very good demonstration of an apparently simple-to-use software program. It seems that even a non-techie could probably master this in no time. My concern would be clearly stating the assumptions involved to one's client--as with any other Monte Carlo type simulation software. Andy asked several times what might differentiate this program from all the other financial planning software out there but I didn't get a sense of a really solid answer. That being said, I will try and free trial.
  • Good stuff
  • Interesting
  • Excellent!
  • Very relevant topic
  • David did a nice job.
  • Great presentation. Quite thought provoking. Could have used more time for questions but Andy did a great job facilitating with the time allotted.
  • Outstanding! I intend to incorporate this tool into my practice immediately.
  • It was of some use but not really that much of a revelation. I don't think that, for our clients at least, the method of limiting budgets as discussed would be helpful.
  • I liked the case studies.
  • Given the time David had, I think he did a good job and is helping us with younger clients. He glosses over some of the trade offs with using a simple approach. In bad periods, clients could go years with no inflation increase which would have a major impact on their lifestyle. Not having the flexibility or knowledge to change the probabilities to a 25 or 35 year retirement period is a real issue. Not being able to adjust spending over time is also a big deal for some clients.
  • The software is a little simplistic and "linear", I prefer the Monte Carlo approach, but certainly a useful estimate of retirement withdrawal success.
  • Thanks Andy!
  • Interesting
  • Excellent tool for what it is designed to do
  • Very good
  • Very interesting approach to retirement planning.
  • Different way of thinking. Challenging conventional rules of thumb.
  • Good topic, very timely--thanks
  • Interesting need more detail
  • Superb. Extremely useful information!
  • Presenter seemed impatient with some of the professionals on the call--I empathize.
  • His credibility went into the toilet when he said Pfau's articles were meant to gain headlines. It appears a lot of his assumptions are based on the history of US market returns....very dangerous.
  • Not a great presenter, went through the examples too quickly, hard to see the program screen
  • Too basic. I think you need better tools to model retirement. Also, the main issue is that it is hard to control clients' spending in retirement (just like before retirement.) A better webinar would be to help with the behavioral issues with regard to overspending. We can tell our clients how much to spend, but it doesn't mean they are going to adhere to the rule---especially in early retirement.
  • Interesting concepts.
  • I liked the perspective on 'how to communicate this to clients'.
  • Difficult to read spreadsheets online
  • An excellent new voice in retirement planning.
  • Very useful information, but not enough time allotted to complete it.

What Will $2 Million Get Your Clients In Retirement? edit
Wednesday, January 15, 2014 13:36

Tags: dividends | financial planning | retirement planning

I spend a lot of time helping people understand how much money they will need to meet their retirement goals. Today I want to look at this another way: What will $2 million actually get you in retirement? This is an interesting question because a) Many people believe that $2 million is a comfortable amount to meet their retirement goals and b) We can look at the different ways in which a couple can use this $2 million without running out of money.

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Like any retirement calculations, this one involves many assumptions. But as long as our assumptions are reasonable, say 6% for equity returns rather than the 10% figure that many people used to use, we can come up with a very reasonable estimate for how much money one needs to retire comfortably.


Let’s start with the assumptions I used for the couple we will look at:

Inflation (CPI)


Current Age of Both People


Age Of Retirement


Age When Both People Have Passed Away


Social Security at age 67 (combined)

$35,000 per year

Average Savings Rate

None (Already Retired)

Total Investment Balance Today

$2,000,000 (50% in Taxable, 50% in IRAs)

Recurring Annual Expenses in Retirement


Investment Mix Before Retirement

70% U.S. Value Stocks,
30% Medium Term Treasuries

Return Assumption Value Stocks

6% per year

Standard Deviation Value Stocks


Return Assumption Treasuries

1.5% per year

Standard Deviation Treasuries



Before generating a retirement plan for this couple the first thing we need to clear up is, what constitutes success? We live in a dynamic world, especially when it comes to investing. So I like to look at the probability of never running out of money in retirement using Monte Carlo analysis, where thousands of scenarios are run, shocking investment returns in every scenario in every year. In this example I will define success as having a probability of at least 85% that funds never run out in retirement.


Using Monte Carlo analysis in our retirement planner I calculated that the probability they never run out of money is 97%. This easily meets our definition of success. In fact, this couple can spend more than $70,000 and still succeed, given that our definition of success is that the probability that funds are never depleted is 85% or more.


So how much can this couple spend per year and still have an 85% chance of achieving all of their retirement goals? I ran some scenarios and found the answer to be $81,000. This is the amount they can spend each year and still have an 85% chance of never running out of money.


Yet another question we can ask is, how can they spend $81,000 in retirement and raise the probability of never running out of money? There are really only two ways to do this since this couple is already retired (assuming they don’t want to go back to work): They can find higher returning investments with the same level of volatility they currently have or they can find investments that have the same returns, but less volatility.


My favorite way to reduce volatility while maintaining reasonable levels of return is to buy high quality dividend paying stocks that have a history of rising dividends over time. A few of my favorite dividend payers for retirement portfolios that have consistently raised their dividends over the years are Johnson & Johnson (JNJ), Sysco (SYY), AT&T (T), Wal-Mart (WMT), Coca-Cola (KO), and Eli Lilly (LLY).


Div Yield


1 Yr Div Growth Rate

5 Yr Div Growth Annual Rate


























I replaced their Equity Value fund with the stocks listed above, equally weighted. I kept the same total return assumption, but lowered the level of volatility to the historical levels of these stocks. That is, I reduced the volatility level from about 16% to 13% per year.


The probability that this couple never runs out of money now jumps from 85% to 93%. This is a large jump, solely due to the fact that they are now invested in more stable, solid dividend paying stocks instead of an equity index fund.


Each person and couple has a different situation and might need to change a variety of things in order to meet their retirement goals. But it is usually impossible to tell whether or not a person can retire when you want until they sit down and actually run through the numbers. At that point they can begin running interesting scenarios that will tell tehm what they need to do to get to their goals.


Commenter On Retirement Income Planning Session: “This Webinar Allowed Me To Begin Outlining A Method Of Addressing My Client's Question Directly” edit
Monday, November 11, 2013 11:58

Thanks for the positive feedback about last Friday’s webinar about retirement income planning.  That headline captures the most poignant of many comments from attendees.


At the session, which is available for replay and continuing education credit, Manish Malhotra of Income Discovery, a sophisticated new retirement income modeling app, shows innovative and intricate ways to find optimal retirement income solutions. The session and CE credit are free to A4A members.


In an exit survey asking attendees to rate and review of the session (see all the comments below), an advisor said he got a call from a client earler in the day with a question that matched one of the case studies covered in the webinar. The client asked the exact question asnwered during the webinar! Now that's pretty cool because it tells me A4A is giving you real practical and timely ideas. While advisors tell me that all the time, it is nice to get such real-world evidence confirming it.  


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Being able to model different Social Security start-dates for two spouses, for example, is easy. Plus you can add bond ladders to portfolios and make what-ifs based with start dates for annuitizing an income stream in forecasts.



Look at the variation in comments from attendees and the valuable feedback. Manish received an overall rating of 4.2 out of five, and the following comments: 

  • Very informative and will help my business
  • Good, hard to digest with so much info, but very helpful
  • Definitely worth my time.  We use a different social security software so it was good to see the differences in what this offers.
  • Good.  Stuff .  Retirement income generation is a area that cannot be talked about too much.  I'm always willing to listen to new ideas.
  • The topic was very relevant but I found it a little difficult to keep up with the pace of information.
  • Not too helpful for my practice
  • Great software and really gets at the income needs of retirees in a practical way!
  • Powerful tool, but out of the reach of many small advisors
  • Very good. Great product
  • This was more of a sales pitch than I was prepared for.
  • Very good.
  • Good. Actually MGP does some of this. But not quite as well.
  • I thought it was valuable to me as an advisor focusing on retirement income planning strategies.
  • Fairly complex issues that apparently can now be more analyzed more rationally for our clients  to produce better client recommendations. Interesting + useful.
  • The software fills a gap that is really needed in this time when many people are retiring and don't have pensions.
  • Nice piece of software, but not sure if it gives you the ability to drill down in reports to see how results were arrived at.
  • Well worth the time spend to watch this presentation.
  • This was an excellent webinar. It was well-organized and very informative in terms of showing advisors the tools available to make and understand social security election decisions on behalf of clients. I received a call from a client earlier in the day, higher-net worth type, and he posed this exact question to me, as he had just turned 66 last month. This webinar allowed me to begin outlining a method of addressing my client's question directly, and gave me some superlative talking points to utilize now.


Men Are Idiots, Fidelity Research Shows; Women Remain Less Confident Than Men About Investing And Retirement Decisions edit
Thursday, September 26, 2013 10:17

Tags: Fidelity | retirement planning | women investors

Men are such idiots, according to a Fidelity study. Okay, that’s not exactly the way Fidelity worded it in its press release.


“When asked to assess their confidence level in taking full financial responsibility of retirement decisions from a spouse if necessary, many women are more confident in their partners’ ability than their own,” says the press release.


And here’s the part showing what dummies men are:

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“The men in their lives agree," according to the survey. "Men are more likely than women to be very confident in their own ability (53% versus 45% of women).” 


In other words, women know what they do not know. Men, in contrast, are more often confident than women about their ability to manage the couple’s collective wealth.


Would be great to see research showing which of the sexes is better at investing. My guess is the investment track record of men and women would be about the same.  Men just think they’re better at it.  


Women don’t come away unscathed. They, too, are human.


“Women, in turn, are more likely to be confident their ‘other half’ could assume this role (52% versus 43% of men),” the research shows. “Surprisingly, younger women tend to be the most deferential of all.” In other words, women buy into the notion that their men are better financial managers.


An important finding: The number of women claiming primary responsibility for day-to-day financial decisions jumped to 24% in this year’s survey—up from 15% in 2011—and the number of women claiming “primary status for long-term retirement decisions” more than doubled to 19% from 9% in 2011. That could be the start of a major trend in how couples deal with money. Traditionally, this was a man’s job. In modern families, however, it will be a lot more common for the woman to become the primary decision-maker on finances.


Another gem: Fidelity says the average American can expect to spend about 30 years or more in retirement. For a 65-year-old couple today, there’s a 50% chance one will live to the age of 92 and a 25% chance one will live to the age of 97.


Fidelity’s research on financial planning issues is often good quality. It’s something Fido does well.


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