Retirement Calculator Review: Optimal Retirement Planner

Posted by Madison on August 17, 2011

A lot of what we do is plan for retirement by accumulating money. However, there’s some planning that goes into the decumulation phase too. And it’s where one of my favorite retirement planning calculators excels: the Optimal Retirement Planner (ORP).

There’s a lot of advice floating around to access your taxable accounts first, then your tax deferred accounts, and finally your Roth IRA. But in reality, it can be better to focus on optimizing withdrawals and Roth conversions to minimize taxes. That’s where the ORP comes in handy.

Optimal Retirement Planner

The planner doesn’t just calculate a final number like many other retirement calculators, it helps you plan how to access your retirement accounts in the best way possible broken down by year:

The Optimal Retirement Planner (ORP) is a retirement decision support system (RDSS) that optimally schedules retirement savings and withdrawals to maximize the amount of after-tax money available for spending throughout retirement.

ORP Inputs and Outputs

Inputs: Run the ORP with your typical retirement planner information (ages, account balances, pension income, social security benefits, annual retirement savings, age to retire) and other financial based questions. The input screen is quick to run through, if you have all of your information at your fingertips.

Outputs: The outputs are where I think the ORP is a unique retirement planner. Here’s a list of the output schedules by year:

  • Contributions to retirement savings accounts
  • Annual after-tax income
  • Withdrawals from retirement savings accounts
  • IRA to Roth IRA rollovers
  • IRA to After-tax Account transfers
  • Annual personal income tax bracket
  • Annual retirement account balances.

ORP Review

I really like the ORP to get a good sense of planning each year of withdrawals like an overall roadmap. I’ve run some scenarios that suggest high Roth conversions in early years. This makes sense based on minimizing taxes over a lifetime, but obviously, you still need to make decisions about what to do with the data.

In addition, you really need to read through the explanations of the report to understand not only the outputs, but what the model does and doesn’t do.

The ORP allows you to save your input parameters using cookies, but unless I’m missing something, there isn’t a good way to save all your information to revisit in the future, so I’d recommend dumping the data in excel when you’re done.

Tax Limitations

Much of the ORP strategy is based on maximizing the lower tax brackets in the current tax environment. Obviously, one of the drawbacks (like with most retirement calculators) is that the tax brackets can, and likely will, change over time. Since the calculator doesn’t have a way to account for this, you also need to add a layer of common sense to the outputs and understand exactly what it’s suggesting and why.

Action Plan

If you haven’t given the Optimal Retirement Planner a try yet, it’s one of the retirement calculators that you might want to run your numbers through to see what it says. I’d be interested to hear what kind of strategy it recommends for drawing down your nest egg.

Have you used the Optimal Retirement Planner? What are your thoughts?

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Comments to Retirement Calculator Review: Optimal Retirement Planner

  1. Woo Hoo!
    ORP says I will be able to retire at 62!

    MaMa Lord

  2. Mapping and planning out all financial aspects of any retirement is extremely important. Having all your ducks in a row will allow for a safe retirement.

    Your Own Retirement

  3. ORP is incredibly useful modeling how taxes affect portfolio withdrawals. By setting tax inputs, it pretty accurately shows how taxation affects pretax withdrawals and overall returns. Which other calculators omit, causing overly optimistic projections. (But it overestimates social security taxation at lower incomes by assuming most SS is taxed.) It can limit your annual spending for ACA or other reasons, which is handy for those wanting to stretch their portfolio with consistent withdrawals, rather than maximizing current spending.

    For those with larger pretax accounts, ORP proved that spreading pretax withdrawals is a winner, by leveling taxes, reducing RMDs, and the chance of getting a social security tax torpedo. Varying when pensions or social security start can yield counterintuitive results, so experimentation pays off.

    The ORP author was very responsive explaining some supposedly quirky results that made sense after better understanding how the model assumptions worked. He appears to keep its internal tax computations updated. Very highly recommended!

    Stevie Wonders

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