Most online retirement calculators are overly simplistic. 

They can be a great starting point.'s Retirement planner, for instance, is a terrific resource. (And better than calculators from many financial institutions *cough which can have ulterior motives cough cough*.) It allows you to input a few variables such as how much you want to spend in retirement and how long you expect to live, and it will give you an exact figure for how much you'll need to save for retirement.  

This is valuable.

But when it comes to something as important as planning for your retirement, and deciding how to draw down the capital you've accumulated for retirement, it shouldn't be the end of the matter. It should be a starting point. 

It's important to realise that online retirement calculators take a fairly simplistic view of retirement and make some enormous assumptions. 

They assume that your retirement nest egg will reduce in an orderly fashion like this:

When your situation will probably look more like one of these lines:

Simple retirement calculators:

  • Assume you'll generate a constant investment return throughout your entire retirement. 
  • Assume that you'll spend the same amount of money throughout your retirement.
  • Assume you won't receive any possible capital injections (such as freeing up capital by rightsizing your home) or incur one-off expenditures (such as travel, car purchases, renovations, or helping children get on the property market). 
  • Assume that you're happy to spend your last dollar on the day you expect to die, and that you don't care about how much you leave in your estate; nor do they factor in a buffer that might give you an important sense of security during your twilight years.

Most of these assumptions won't apply to you. For example: 

  • You may expect to downsize (right-size) your home at some point - even if it's in the very far future.
  • You may want to help out family members with a warm hand (while you're alive) rather than with a cold hand (after you've passed away), and the assistance you provide will vary considerably from year to year. 
  • Your retirement expenditure won't stay constant throughout your life. Most people want to spend more at the start of their retirement, and tend to spend less as they approach their eighties. 

To illustrate this, I've created the following video to "peek behind the curtain" of how these calculators operate, and how you can create your own simple calculator to investigate how these scenarios might impact your retirement.

This blog is made possible by Fairhaven Wealth and its wonderful clients.

I hope it's valuable! If you have any questions or feedback, let me know.

(If you want to run through this process with me, check out my business Fairhaven Wealth. This type of "flawcasting" exercise is a small but important part of my advice process.)

Sonnie Bailey

In his spare time, Sonnie likes telling people that he’s a former Olympic power walker, a lion tamer, or that he is an orthodontist. He is none of those things. In reality, Sonnie is a financial planner based in Christchurch. Through his business, Fairhaven Wealth (, he provides independent, advice-only, fixed-fee financial planning services. Sonnie is a “recovering lawyer”: he has specialised in trusts and personal client work. He has also worked as a financial services lawyer for many years.

2 Responses

  1. Nice video tutorial Sonnie.

    The return assumption sure is a hard one. Especially if some of your portfolio is in higher risk investments such as shares where the returns are more volatile. Makes the withdrawal process a bit more complex. For example, if stocks are down 10% one year it would be much more preferable to withdraw from your bond or bank account that year in order to not eat into your losses.

    Thats where an adviser can really help. By getting in to all the nuts and bolts of a decumulation strategy

    • Thanks Nick.

      I agree – the return assumption is a tough chestnut. There are soooooooo many people who think they can offer certainty about what returns you’ll generate, but I think that reveals more about the person making the prognostications than what the future actually holds. I discuss that more here:

      And of course, that’s not the only assumption/uncertainty. How long you’ll live; what your health will be; Government policy in relation to NZ Super and residential care; issues relating to your broader family situation; and broader societal, technological, economic, environmental, economic, and political factors that might profoundly shape the world and what retirement will look like. I often say to clients that planning for several decades down the track is like planning for today way back in 1980. There’s so much we can’t know about the world of tomorrow. Uncertainty is baked into any plans for the future – we need to accept it and embrace it. As the old gambit goes: almost every plan goes out the window once it goes face-to-face with reality. The value isn’t in the plan, it’s the planning.

      And yep, developing a decumulation strategy is really valuable. In some ways I think this article is a companion piece to another recent article where I talked about how to calculate your asset allocation, which gives some pretty solid breadcrumbs for anyone engaged enough to read it and apply it:

      Thanks for the comment!

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