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Retirement Calculator

This program calculates the costs associated with sending an elder to a private retirement home. Several assumptions are made on the calculation, but overall should give a good idea if the elder has sufficient funds to reach 100 years of age. Please note that all fields are mandatory.

The calculation result will open a new web page tab. In this way the user can run several scenarios without losing the data for comparison.

Retirement Age
Cash available at start (thousands)
Monthly Pension Amount Received
Monthly cost of retirement home
Monthly out of pocket expenses (medications, clothing, trips, misc., etc.)

Note: please leave out the % sign when entering percentage amounts.

Estimated Annual Inflation rate as a %
Expected Annual Investment Return rate as a %
Estimated Taxation rate on investments as a %

Home Sale (if not applicable, leave both fields blank)

Home is sold in what year (1, 2, 3 ... 9 etc.)
Cash received from home sale (after expenses)

Assumptions

  1. The calculations are made on an annual basis. That implies that the monthly calculations of cash payouts during the investment year (quarterly dividends, compounding cash investments, etc.) are not taken into account. The result is that using an annual calculation approach will have small calculation deviations if a monthly calculation was used instead. This should be of minor concern as this model gives a general estimate of cash flows based on estimates and expectations.
  2. The Estimated Annual Inflation rate, the Expected Annual Investment Return and Estimated Taxation Rate are fixed for the duration of the calculation. In real-life these rates change every year, but for the sake of calculation simplicity they are assumed to be fixed.
  3. The inflation rate is used to calculate the annual cost increase of a retirement home. It is expected that a for profit retirement home will have an annual cost increase. It is also applied to the out of pocket expenses (oope) cash increase year over year. The same "oope" at year 1 will not have the same value as in subsequent years and requires a cost of living (inflation) adjustment. The inflation rate is also used to increase the pension amount received year over year. Governments, generally adjust pensions based on inflation, although it may be optimistic to assume they adjust it to the cost of living.
  4. The Expected Investment Income is calculated on the excess cash available after expenses have been taken into account. On an annual basis, 60% of the cost of the retirement home cost is set aside as cash. This cash is not included in the Expected Investment Income calculation as it would sit in a savings account earning very little interest. This cash provides liquidity during the year to pay for the retirement home, "oope" cash and to pay taxes. It is assumed that a certain amount of cash needs to be kept available to cover fixed costs and unplanned expenses. It is assumed that a "float" of 6 months of expenses are kept as cash in the account. When the float amount drops below 60% someone will have to get funds from the investment account to keep the cash float at that level.
  5. The Estimated Income Tax assumes the person is only taxed on their investment income as their only source of funds.
  6. Cash at the end of year assumes investment funds and cash available minus the out of pocket expenses, retirement home cost and taxes paid.
  7. The home sale is typically a source of funds for retirees to sustain their retirement home cost. If the sale of a home is used for the calculation, then the year the home was sold needs to be added. The range is year 1 though 9. That is the calculation starts at Year 1 when the person retires. What year is the house sold in? Is it 2 years after the person retires? If so the value entered would be 2. If the home is sold on the same year as the person retires, then the year value entered would be 1. The year of sale is included here as in some cases it may take more than a year to sell a home and the cash is only available in the subsequent year for calculation.
  8. The calculation stops when the age of 100 is reached or when there is insufficient cash available to cover the annual expenses, whichever comes first.