Q My wife and I are both 62 and retired. We have 401(k) assets of about $1.2 million, have limited long-term-care insurance and find ourselves increasingly on a fixed, stagnant or even declining income. The latest indication of this is her Minnesota Teachers Retirement Association pension which, when it commenced a few months ago, was to increase 2.5 percent a year. However, the TRA recently announced that the annual increase is going to 0 percent. I anticipate this is just one of the many decreases in our incomes and/or effective increases in taxes that we will experience in retirement. I plan to construct a spreadsheet that assumes up to 30 years of retirement. My biggest challenge is to get a handle on the optimum rates of withdrawal of 401(k) assets. Do you have insights or suggestions as we tackle these tasks?


AA s you know, figuring out how much you can safely withdraw from your retirement funds is a tough task. There are so many "known unknowns," to use Donald Rumsfeld's favorite expression. History and experience are useful guides, but we know that surprises lurk in our future, some positive and some negative. Yet if we're too conservative with our money we'll miss far too much in life being cautious, and if we're too carefree we could well end up in penury toward the end of life.

This isn't a plea for ignorance or to do nothing. It's great that you're planning to run the numbers, think through scenarios, and question previous assumptions. But I would take financial planning projections with a grain of salt and remember that you can revise them over the years. In going over the numbers you'll want to be sure to include Social Security. You'll also want to explore whether you plan on working part time.

In this column, I can touch on only a few issues. There are two comprehensive financial planning calculators I'm comfortable recommending for anyone who wants to take a DIY approach (a smart move even if you do end up hiring a professional). Analyzenow.com is the website created by Henry "Bud" Hebeler. He offers users the option of simple planners that are free and more complicated ones that are available for a modest charge. His advice is conservative. When things go wrong or you make a financial mistake he doesn't want the result to be catastrophic. This paragraph from a recent article of his captures his approach (and you can read the article at his website):

"My plea is for people to give more recognition to the financial conditions of our times, be careful with assumptions used in commercial planning programs, assume very long lives, include some reserves for unknowns, use planning programs more for comparing results of alternatives than for 'accurate' projections of the future, recognize that the future is unlikely to be like the past and ensure that investment management fees and costs are low because they are going to be an even larger drag on the smaller future returns!"

Another financial planning calculator I like is the brainchild of Boston University economics Prof. Laurence Kotlikoff. ESplanner.com has a basic plan for free, and I'd give it a try to see how you like it. But you'll want the firm's centerpiece program if you decide to go with it. The program is dense, time-consuming and requires lots of data. But it also spews out a lot of interesting analysis and suggestions.

As readers of this column know, I'm usually wary of most middle-income folks working with a financial planner. But their expertise can be invaluable at major transition points, such as retirement. You could look for a fee-only certified financial planner (CFP) that can look at your whole financial situation and not just slices of it. The main website for delving into fee-only financial planners is the National Association of Personal Financial Advisors at www.napfa.org, and for CFPs the main website is www.fpanet.org (not all CFPs are fee-only, by the way). A well-known financial planning group that targets middle-income households is the Garrett Planning Network at www.garrettplanningnetwork.com.

Chris Farrell is economics editor for American Public Media's "Marketplace Money." Send questions to cfarrell@mpr.org.