The challenge when planning for retirement is figuring out how much you will need to spend each month once you retire and how much you need to save in order to give you that level of income.
Company pensions are definitely an effective way to grow your retirement savings, but knowing how much you should be contributing and what you should be investing in have a significant impact on the ultimate lifestyle you will be able to live in retirement.
Many experts recommend saving sufficient funds to provide for about 70% of pre-retirement income. In retirement, living expenses are usually lower, with no mortgage or education costs, children moved out of the home and no more work-related expenses. But inflation and health related expenses have to be taken into account. If you have a spouse, both of you should complete the Retirement Planner to have a comprehensive plan.
During the planning stages, using approximations is adequate to give you a good idea of what it takes to meet your retirement income goals.
In order to complete the retirement planner, it would be helpful to have the following documents readily available:
Complete the information and click the Results button to see your retirement plan. The results will let you know if you are on track or whether you should consider contributing more, possibly consider retiring a bit later or possibly selecting a different investment option.
Adjust any amount and your results will automatically be refreshed.
The retirement planner estimates your financial resources at retirement based on your current age and planned retirement age, and determines if you will have enough to meet your financial goals.
The calculations assume that the annual earnings will grow at this rate each year until retirement.
It’s hard to estimate how long we will live. One approach is to plan for income until the end of your life expectancy plus a contingency of a few years.
Include expected gross earnings from employment or self-employment for the current year. You can also include net rental income and alimony received if applicable. The retirement planner selects by default a retirement income goal based on earnings. You can change this on the Goals tab.
Enter your current account balances for all company and individual pension plans and planned monthly scheduled savings to these accounts.
You can also include other assets that you expect to receive in the future, such as a lump-sum payment or inheritance.
Enter the current balance in your company pension plan or individual pension plan (i.e., the market value of these assets).
This amount may also include bank accounts, bonds, term deposits, stocks or mutual funds that you intend to use specifically as a source of income for retirement.
Enter the monthly savings you are currently contributing to a company pension plan or individual pension plan (including employer and any voluntary contributions).
You can account for lump sum payments you expect to receive in the future. These may include an inheritance, gift, insurance settlement, or proceeds from the sale of an asset such as a property, stock options or retiring allowance. The amounts entered here should be after-tax amounts or amounts not subject to tax.
Also enter the year you expect to receive this amount. If the year is not known, enter a year when the payment is almost certain to have occurred.
Enter the monthly amount you expect to receive from a Social Insurance Pension.
If you are in a defined benefit pension plan, enter the expected monthly amount and the age on which you plan to start receiving the pension. You can also include other income you expect to receive during retirement, such as a part-time or contractual income, or rental income.
Enter the monthly amount you expect to receive from a Social Insurance Pension. Contact the Social Insurance Department of the country where you earn the pension for more information.
A defined benefit pension plan provides income during retirement based on a formula that usually takes into account earnings and years of service with the employer.
If you have a defined benefit pension plan, you should enter the projected monthly pension payable at the age you expect to start receiving the pension. You will find this information on your most recent annual statement from the pension plan.
Some pension plans provide cost-of living adjustments, sometimes called indexing, to protect the pension against inflation. Adjustments follow a preset formula linked to the Consumer Price Index (or CPI).
If you plan to earn additional income to top up your savings during retirement, enter the income you expect to receive each year, and the starting and ending year during which you will receive the income.
If you select an annual amount for the retirement income goal, formulate it also in terms of today’s dollars even if you are many years from retirement. The calculations adjust the income for inflation between now and when you reach retirement to provide an income that has the same purchasing power as today.
If you select to receive annual withdrawals throughout retirement, the calculations will assume that your account remains invested and that you will take withdrawals from the account until funds run out. The maximum drawdown rate is determined by the Department of Labour and Pensions. The payments will vary each year depending on how much you need to meet the income goal, subject to the maximum amount set by the Cayman Islands pension legislation. In the event of your death, the balance of the account is payable to your beneficiary.
With this option, your account will remain invested and you will receive payments directly from the account. The maximum drawdown rate from registered pension funds is prescribed by the Department of Labour and Pensions. The payments will be variable based on investment returns and your age. In the event of death, the balance of the account is payable to your beneficiary.
An annuity is a contract with a life insurance company that provides periodic income for life in exchange for a lump sum amount called "premium".
The premium will be the amount that you have accumulated in your pension and/or savings account through your working years. The periodic amount that you will receive is based on your age, the total premium amount, current interest rates and other assumptions and the guarantees that come with the payments, such as paying the annuity for a minimum number of years.
With this option, your account will remain invested and you will receive payments directly from the account. The maximum drawdown rate is determined by the Department of Labour and Pensions. The payments will be variable based on investment returns and your age. In the event of death, the balance of the account is payable to your beneficiary.
Life annuity with no guarantee — A fixed pension is payable to you for as long as you live and ceases at your death.
Life annuity with five years guaranteed — A fixed pension is payable for as long as you live, but if you die before receiving payments for five years, the pension is payable to your beneficiary for the remainder of the guarantee period.
Life annuity with ten years guaranteed — A fixed pension is payable for as long as you live, but if you die before receiving payments for ten years, the pension is payable to your beneficiary for the remainder of the guarantee period.
Life annuity with cash refund — A fixed pension is payable for as long as you live. Upon your death, your beneficiary will receive the difference, if any, between the total periodic payments made to you and the initial amount paid to purchase the annuity.
Required assets are the amount you will need at retirement to meet your retirement income goal for the duration of your retirement. Projected assets are an estimate of the amount you will have at retirement. These include your current assets today, all monthly contributions until retirement, plus investment income assuming the expected rate of return for your investor profile.
The shortfall of assets is the difference between what you need to meet your retirement income goal and the estimated assets you will have at retirement.
The table shows your current monthly savings and the additional savings required to reach your goal. The additional savings, planned savings and future investment income should be sufficient to achieve your selected retirement income goal. Additional savings are capped at 100% of your annual income. In such case, it may be difficult to save enough to meet your goals.
The chart compares expected income for each year of retirement to your retirement income goal, assuming your assets earn the expected rate of return. The chart covers the first year of retirement to the end of life expectancy.
The expected rate of return used in the calculations is based on the investor profile selection.
Calculations use a higher expected rate of return for funds invested more heavily in equities. However, when selecting your allocation, keep in mind that there is a chance that more risky investments underperform expectations in the future, and this would result in lower retirement assets than a more conservative investment strategy.
Complete the Investment Risk Strategy Quiz to find the Investment Profile Option that is most appropriate for you.
The chart shows how your assets may change over time if you earn the expected rate of return, deposit the planned monthly savings and take withdrawals to meet your retirement income goal. In reality, your assets will have a lower value if investments underperform expectations and a higher value if you get very good investment returns.
If you find that it is unlikely that you will reach your retirement income goal, you may change one or more of the key items of your plan:
When you decide to retire, you have two main options for receiving your pension income in Cayman Islands:
An annuity is a contract with a life insurance company that provides periodic income for life in exchange for a lump sum amount called "premium".
The premium will be the amount that you have accumulated in your pension and/or savings account through your working years. The periodic amount that you will receive is based on your age, the total premium amount, current interest rates and other assumptions and the guarantees that come with the payments, such as paying the annuity for a minimum number of years.
This calculator will give you an estimate of the premium required for the desired level of income, or the monthly income that a lump sum can provide. Please note that these are estimates only and results will change over time based on changes in interest rates and other assumptions required for pricing annuities. Please reach out to providers of annuity products in the Cayman Islands for an actual annuity quote.
Complete the information and click the Results button to see an estimate of the monthly income provided by the lump sum premium.
Adjust any amount and your results will automatically be refreshed.
Life annuity with no guarantee — A fixed pension is payable to you for as long as you live and ceases at your death.
Life annuity with five years guaranteed — A fixed pension is payable for as long as you live, but if you die before receiving payments for five years, the pension is payable to your beneficiary for the remainder of the guarantee period.
Life annuity with ten years guaranteed — A fixed pension is payable for as long as you live, but if you die before receiving payments for ten years, the pension is payable to your beneficiary for the remainder of the guarantee period.
Life annuity with cash refund — A fixed pension is payable for as long as you live. Upon your death, your beneficiary will receive the difference, if any, between the total periodic payments made to you and the initial amount paid to purchase the annuity.
This estimate is only an illustration and is intended to give you an idea of the cost of purchasing an annuity or the benefit that you will receive with the pension assets you have accumulated. Annuity premium costs vary frequently, so this is just an estimate and no guarantee that it reflects actual current pricing offered by institutions in the Cayman Islands. Please reach out to providers of annuity products in the Cayman Islands for an actual annuity quote.
When you retire, one of your options for receiving your pension income is the drawdown option from your individual Retirement Savings Arrangement. For Cayman Islands registered plans, withdrawals are taken over your lifetime subject to both a minimum and maximum withdrawal rate calculated in accordance with pension legislation.
The Retirement Drawdown Tool shows the payments that you would get based on your account balance, retirement age and expected rates of return. Note that the account balance is paid to your beneficiary on death.
Complete the information and click the Results button to see how long annual withdrawals from your pension account may last over the period of your retirement. Your current balance earns investment income at the expected rate of return. You can choose to increase withdrawals each year by the rate of inflation.
The total of your registered pension savings. Any additional voluntary savings that you have accumulated would not be subject to the prescribed minimum and maximum limits.
Select an option for the withdrawals. If you enter an amount for annual withdrawals and it falls below the minimum in any year, the minimum withdrawal will apply. If the desired selected withdrawal is above the maximum in any year, the withdrawal will be limited to the maximum allowable amount.
If you select the option to increase payments each year, the annual withdrawals will increase each year by the expected rate of inflation as long as they do not exceed the maximum allowed. This is helpful to get sufficinet funds to protect your purchasing power against rising prices.
The expected rate of return for your savings will be based on the asset mix that you are invested in. If you are in a more aggressive portfolio with higher allocations to stocks, you may choose the High Risk Tolerance. If you are in a more conservative portfolio with a higher allocation to bonds or cash, you may choose the Low Risk Tolerance. If you have a mix of stocks and bonds, then consider choosing Moderate Risk Tolerance.
The number of years you will be taking withdrawals from your account.
This chart shows the expected value of the account each year in the future and the effect of drawing down pension savings, based on the expected rate of return.
This chart shows the portion of the assets that are from the starting balance in the account and the portion that is from expected investment income.
The educational savings calculator will help you determine how much you need to save for your children's education. Education costs can be significant, so it is important to plan ahead.
The educational savings calculator considers your current assets earmarked for education plus the monthly savings you plan to save for your children. Saving for many years will help generate investment income that can go toward education costs. The calculator also determines the required amount of contributions that will be necessary to fund estimated future education costs.
Fill in the necessary data and click the Results button.
Enter the current age, the start age and duration of post-secondary studies for each child along with any amount you already have saved and the amount you expect to save monthly. Then select the tuition option based on where you think your children are going to go to school, assumed rates of return and inflation, and click the Update Results button.
Adjust any amount and your updated results will automatically be refreshed.
For each child, enter the name, age, age of post-secondary studies and duration of studies. Then enter the value of assets for each child's education needs and the monthly savings amount. Monthly savings are assumed to increase each year by the expected inflation rate.
Your planning should consider country-specific education costs for tuition, books, room and board, and other costs. Researching costs for preferred institutions can help in ensuring that you will have the necessary funds. Enter current amounts for tuition, books, room, board and other costs and the results will take into account separately expected inflation for tuition and for room and board.
Your planning should consider country-specific education costs for tuition, books, room and board, and other costs. Researching costs for preferred institutions can help in ensuring that you will have the necessary funds. Enter current amounts for tuition, books, room, board and other costs and the results will take into account separately expected inflation for tuition and for room and board.
The expected rate of return for your savings will be based on the asset mix that you are invested in. If you are in a more aggressive portfolio with higher allocations to stocks, you may choose the High Risk Tolerance. If you are in a more conservative portfolio with a higher allocation to bonds or cash, you may choose the Low Risk Tolerance. If you have a mix of stocks and bonds, then consider choosing Moderate Risk Tolerance.
The room and board and other costs and monthly contributions will increase each year by the "general" rate of inflation. Expected tuition costs will increase each year by the "tuition" rate of inflation.
The table and chart show, for each of your children, planned and required monthly deposits for tuition, books, room, board and other costs. The chart compares education costs to expected savings when post-secondary education starts.
This quiz helps you identify how much risk you are willing to accept.
The answer to each question has a point value, and the total is tabulated to arrive at a total score. The total score determines the Investment Profile Option suitable to your personal situation, investment experience and risk tolerance.
After completing the short questionnaire, click the Results button to view your score and risk profile.
If there are changes in your financial circumstances, you may consider reviewing your investment risk strategy.
Select the investment strategy based on your total score.
Your investment risk strategy is made up of your choice of seven categories of investments.
The pie charts show you how these categories are combined to form an investment plan for each risk strategy.
You are close to retirement or your primary concern is the security of your investment.
You may be approaching retirement or simply prefer to take less risk. Security is your most important concern.
You want a balance between growth and security. You will accept a small amount of risk in order to have the potential for higher returns over time.
You are prepared to take some risk to maximize your returns. Safety is still an important strategy but potential growth is becoming more important.
You want a balance between growth and security. You will accept some risk in order to have the potential for higher returns over time.
You plan to be invested for a very long time and are willing to accept additional risk and volatility in exchange for potentially higher returns.
You plan to be invested for a very long time and are willing to accept additional risk and volatility in exchange for potentially higher returns.
Consider the results of this quiz to assist you when selecting your investment strategy.
Saving for any event takes discipline. Understanding how much you need to be saving is the first step in putting your plan into action. . The sooner you start saving, the more chance your funds have to grow. Compounded investment returns generate a snowball effect when you invest over many years.
Complete the information and click the Results button to see how much you may save over the years you plan to invest. Your current balance and planned monthly savings grow at the selected expected rate of return. If you enter a value for the rate of inflation, the contributions will increase each year by the selected rate.
Adjust any inputs and your results will automatically be refreshed.
The current value of your savings and the amount you plan to save each month.
The number of years during which you will be contributing to your savings plan.
The expected rate of return for your savings will be based on the asset mix that you are invested in. If you are in a more aggressive portfolio with higher allocations to stocks, you may choose the High Risk Tolerance. If you are in a more conservative portfolio with a higher allocation to bonds or cash, you may choose the Low Risk Tolerance. If you have a mix of stocks and bonds, then consider choosing Moderate Risk Tolerance.
The monthly contributions will increase each year by the expected rate of inflation.
This chart illustrates the accumulation over time of your savings based on your monthly savings amount and the expected rate of return that you selected.
This chart shows the breakdown of your estimated total assets at the end of your savings period between actual deposits made by you and the investment returns that you have made on those deposits.
This tool and its use is not intended to constitute investment advice; users should always consult with a qualified professional before considering any investment.
These calculations are for illustration purposes only and are intended to provide information on the proposed financial strategy. Although every effort has been made to ensure its accuracy, Equisoft Inc. and Island Heritage Insurance Company, Ltd. will not be liable for any damages arising from its use or misuse. These projections are based on assumptions that may not hold true in the future. Expected rates of returns and annual volatility are based on historical performance and for illustration purposes only. These expected rates of returns do not take into account sales, redemption, distribution, optional charges or income taxes payable by any security holder that would have reduced returns. As a result, returns and returns-based data are highly theoretical.
Principal value and investment return of stocks, mutual funds, GIFs and variable annuity/life products will fluctuate, and an investor's shares/units when redeemed will likely be worth more or less than the original investment. Stocks and mutual funds are not insured, may lose value, and are not guaranteed by a bank or other financial institution. Their values change frequently and past performance may not be repeated. Investors will pay management fees and expenses, may pay commissions, trailing commissions and guaranteed fees. If you have any questions, please talk to your advisor.
This tool is for planning purposes only and cannot predict future outcomes or requirements. It should be used as a starting point for investment and planning decisions. You should review your financial situation regularly and revise your strategy to address changing circumstances and objectives. This is not intended nor should it be considered to be advice or solicitation by Equisoft Inc. and Island Heritage Insurance Company, Ltd. to buy or sell investment funds, a particular security or class of securities, or any other investments or products. None of Equisoft Inc., Island Heritage Insurance Company, Ltd. are licensed or registered as an investment advisor nor do they provide investment advice or recommendations.
Equisoft Inc. (the "Company") has developed the software products herein and associated calculation models. Calculations, projections and results are provided for general illustrative purposes only and are not warranted to be accurate or complete. Results presented are based on the information provided and certain assumptions used in the calculation model described in part in the documentation.