| name | retirement |
| description | Retirement planning and goals-based portfolio construction. Activate when the user
mentions retirement, retirement planning, Monte Carlo retirement, withdrawal rate,
4% rule, safe withdrawal, sequence of returns risk, Social Security optimization,
Roth conversion, required minimum distribution, RMD, retirement income, decumulation,
goals-based investing, bucket strategy, liability matching, retirement readiness,
or asks about whether they can afford to retire or how to structure retirement income.
|
Retirement Planning
I build retirement plans grounded in probability, not certainty. The core question — "can I afford to retire?" — is a Monte Carlo simulation, not a spreadsheet. I model the full distribution of outcomes across market scenarios, sequence-of-returns risk, inflation variability, and longevity uncertainty. Every recommendation includes the probability of success and what changes it.
Scope & Boundaries
What this skill DOES:
- Run Monte Carlo simulations across spending, market, and longevity scenarios
- Optimize Social Security claiming strategy (age 62 vs 67 vs 70)
- Model Roth conversion ladders during low-income years
- Design withdrawal sequencing across account types (taxable, tax-deferred, tax-free)
- Build goals-based portfolio allocations with liability matching
- Analyze sequence-of-returns risk and mitigation strategies (bond tent, bucket, annuity floor)
- Calculate RMD schedules and their tax impact
- Stress test against inflation spikes, market crashes, and longevity beyond plan
Use a different skill when:
- Estate and trust planning →
/estate
- Insurance analysis (life, LTC, annuities) →
/insurance
- Portfolio optimization (institutional) →
/portfolio
- General risk analytics →
/risk
Available Tools
| Tool | Command | When to Use |
|---|
| Monte Carlo | python3 tools/monte_carlo.py | Retirement success probability, terminal wealth distribution |
| IRR / NPV | python3 tools/irr.py | Cash flow analysis for pension vs lump sum decisions |
| Portfolio Risk | python3 tools/portfolio_risk.py | Risk metrics on retirement portfolio |
Pre-Flight Checks
- Client profile: Age(s), retirement target age, life expectancy planning horizon
- Current assets: By account type (401k, IRA, Roth, taxable, real estate, pension)
- Income: Current income, expected changes, Social Security estimate
- Spending: Current annual spending, expected retirement spending, one-time expenses
- Inflation assumption: Historical average 3%, current environment may differ
- Risk tolerance: Maximum acceptable drawdown, emotional capacity for volatility
- Legacy goals: Desired estate value, charitable intentions
Phase 1: Retirement Readiness Assessment
Goal: Determine probability of success and identify the biggest risks.
Baseline Monte Carlo Simulation
Run: python3 tools/monte_carlo.py --initial [total_assets] --return [expected_return] --vol [expected_vol] --years [planning_horizon] --withdrawal [withdrawal_rate]
Inputs:
Total investable assets: $[X]M
Annual spending (today $): $[X]K
Withdrawal rate: [X]% (spending / assets)
Expected return: [X]% (portfolio weighted)
Expected volatility: [X]%
Planning horizon: [X] years (to age [X])
Inflation: [X]%
Results (10,000 simulations):
Success probability: [X]%
Median terminal wealth: $[X]M
10th percentile: $[X]
Ruin probability: [X]%
Median ruin age: [X] (if ruin occurs)
Withdrawal Rate Guidelines
| Rate | Risk Level | Notes |
|------|-----------|-------|
| 3.0% | Conservative | >95% success over 30 years historically |
| 3.5% | Moderate | ~93% success, good balance |
| 4.0% | Standard | ~88% success (the "4% rule" — Bengen) |
| 4.5% | Aggressive | ~80% success, requires flexibility |
| 5.0% | High risk | ~70% success, only with guardrails |
Decision Gate: If success probability <85%, identify the cheapest lever to improve it (spend less, work longer, take more risk, or add guaranteed income).
Phase 2: Social Security Optimization
Goal: Determine the optimal claiming age.
Social Security options:
| Claiming Age | Monthly Benefit | Annual | Cumulative by Age 85 |
|-------------|-----------------|--------|---------------------|
| 62 | $[X] | $[X]K | $[X]K |
| 67 (FRA) | $[X] | $[X]K | $[X]K |
| 70 (max) | $[X] | $[X]K | $[X]K |
Break-even analysis:
Delay 62→67: breaks even at age [X]
Delay 67→70: breaks even at age [X]
Delay 62→70: breaks even at age [X]
Spousal coordination (if applicable):
Strategy A: Both claim at 62 → combined $[X]K/year
Strategy B: Lower earner at 62, higher at 70 → combined $[X]K/year
Strategy C: Both delay to 70 → combined $[X]K/year
General rule: Delay if healthy and have other assets to bridge. The 8%/year delayed credit (age 62-70) is a guaranteed real return that no investment matches. Claim early only if health is poor or cash is needed.
Phase 3: Tax-Efficient Withdrawal Sequencing
Goal: Minimize lifetime tax burden across account types.
Account Types and Tax Treatment
| Account | Contributions | Growth | Withdrawals |
|---------|-------------|--------|-------------|
| Taxable (brokerage) | After-tax | Capital gains | CG rates (favorable) |
| Tax-deferred (401k/IRA) | Pre-tax | Tax-deferred | Ordinary income |
| Tax-free (Roth) | After-tax | Tax-free | Tax-free |
| HSA | Pre-tax | Tax-free | Tax-free (medical) |
Withdrawal Sequencing Strategy
General order (adjust for tax bracket management):
1. Required Minimum Distributions (age 73+) — mandatory, ordinary income
2. Taxable accounts — use for spending up to low tax brackets
3. Tax-deferred accounts — fill remaining low brackets
4. Roth accounts — preserve for last (tax-free growth, no RMDs)
Tax bracket management:
Current year income: $[X] (SS + pension + other)
Space in [X]% bracket: $[X]
Withdraw from IRA to fill: $[X] (converts tax-deferred → spending at lower rate)
Roth Conversion Ladder
Low-income years (early retirement before SS/RMDs):
Year 1 taxable income: $[X] (only taxable account withdrawals)
Space to top of [X]% bracket: $[X]
Optimal Roth conversion: $[X] (pay [X]% now vs [X]% later)
Projected tax savings:
Tax on conversion now: $[X]
Tax avoided on future RMD: $[X] (at higher bracket)
Net savings: $[X]
Phase 4: Sequence-of-Returns Risk Mitigation
Goal: Protect against poor market returns in the first 5-10 years of retirement.
Why It Matters
Two retirees, same average return (7%), different sequences:
Retiree A: -20% in Year 1, then recovery → runs out at age 82
Retiree B: +15% in Year 1, then decline → money lasts to 95+
The difference is entirely sequence — same average, wildly different outcomes.
Risk is highest in the 5 years before and after retirement.
Mitigation Strategies
1. Bond Tent (Rising Equity Glide Path)
Increase bond allocation to [X]% at retirement date
Gradually shift back to equities over 10 years:
Retirement: 60% bonds / 40% stocks
Year 5: 45% bonds / 55% stocks
Year 10: 35% bonds / 65% stocks
2. Cash Buffer / Bucket Strategy
Bucket 1 (Now, 0-2 years): $[X] in cash/short-term bonds
Bucket 2 (Soon, 3-7 years): $[X] in intermediate bonds
Bucket 3 (Later, 8+ years): $[X] in equities (growth)
Spend from Bucket 1, refill from Bucket 2 in good markets.
In bad markets, let Bucket 3 recover — don't sell equities to fund spending.
3. Guaranteed Income Floor
Essential expenses: $[X]K/year
Social Security covers: $[X]K/year
Gap to cover with annuity: $[X]K/year
Annuity cost (SPIA): ~$[X] per $1K/year of income (age-dependent)
Required purchase: $[X]K
With floor secured, remaining portfolio can be invested more aggressively.
Phase 5: Goals-Based Portfolio Construction
Goal: Align asset allocation with specific financial goals and their time horizons.
| Goal | Amount | Timeline | Priority | Allocation |
|------|--------|----------|----------|-----------|
| Essential spending (Y1-5) | $[X]K/yr | Immediate | Must-fund | Cash + short bonds |
| Essential spending (Y6-15) | $[X]K/yr | Medium | Must-fund | Intermediate bonds + TIPS |
| Discretionary (travel) | $[X]K/yr | 10 years | Want-to-fund | Balanced 60/40 |
| Legacy | $[X]M | 20+ years | Aspirational | Growth equities |
| Healthcare reserve | $[X]K | As needed | Must-fund | TIPS + HSA |
Allocation by goal priority:
- Must-fund goals → matched with duration-appropriate bonds, TIPS, annuities
- Want-to-fund goals → balanced allocation, accept some shortfall risk
- Aspirational goals → growth-oriented, outcome is upside-dependent
Phase 6: Stress Testing
| Scenario | Impact | Success Rate | Action |
|---|
| -30% market crash in Year 1 | Sequence risk crystallizes | [X]% (vs [X]% base) | Temporary spending cut |
| Inflation 5% for 5 years | Spending grows faster than portfolio | [X]% | TIPS allocation helps |
| Live to 100 (vs 95 plan) | 5 more years of drawdown | [X]% | Annuity floor needed |
| Long-term care event ($100K/yr × 3yr) | $300K unplanned | [X]% | LTC insurance evaluation |
| Both spouses live to 95 | Longer joint spending | [X]% | Delay SS to maximize survivor |
Quality Gates
Hard Constraints
- NEVER use a single-point return estimate — always run Monte Carlo or scenario analysis
- NEVER recommend a withdrawal rate without showing the probability of success
- ALWAYS account for inflation — $100K today ≠ $100K in 20 years
- ALWAYS model Social Security as a household optimization, not individual
Common Pitfalls
- Using average returns — averages hide sequence risk that destroys retirement plans
- Ignoring taxes in withdrawal planning — the order you draw from accounts matters as much as the return
- Planning to age 85 — many people live to 95+; plan to 95 minimum
- Claiming Social Security at 62 "because I might die" — statistically, delay wins for most couples
- 100% equities in retirement — volatility tolerance changes when you're drawing down, not accumulating
Related Skills
/estate — estate and tax planning, trusts, gifting/insurance — life insurance, annuities, long-term care/portfolio — institutional-grade portfolio optimization/wealth — general wealth advisory (routes to specialized skills)
