At 67, will a $600,000 portfolio last until I'm 95?

@Money March 2, 2012: 9:59 AM ET

NEW YORK (CNNMoney) -- I'm 67 years old, retired and have $600,000 in investments. Will this be enough if I live to age 95? -- Judy

It's impossible to give a yes or no answer to your question because the length of time your nest egg will last depends on several factors, including how much you withdraw each year, how you invest and how sure you are that you can count on those withdrawals in the future.

A few online tools can give you a sense of the trade-offs involved. You can then come up with a plan for getting a reasonable amount of income from your investments without too high a risk of running through your money too soon.

One tool is Vanguard's Retirement Nest Egg calculator. Even though this tool uses a sophisticated forecasting technique know as Monte Carlo simulation, it's simple to use and interpret.

Begin by dragging the first of the tool's three sliders to specify how long you want your portfolio to last. Given today's long lifespans, you want to be careful not to enter too short a period. Your assumption of age 95, or 28 more years, seems sound.

Next, move the second slider to indicate the current size of your retirement portfolio -- $600,000 in your case. Then drag the third slider to show how much inflation-adjusted annual income you'd like. You didn't mention a figure, but let's assume $30,000 a year, adjusted for inflation.

How I'm easing into retirement

Once you've done that, go to the portfolio pie chart at the top of the page and enter how you want to divvy up your retirement investments. I'd start with a moderate mix of 50% stocks-50% bonds. Click "Run Simulation," and voila!

You'll get an estimate of the probability your nest egg supporting you for 28 years given the withdrawals and investment strategy you've chosen, or a 77% chance in this case.

You'll also see a graph showing a range of possible portfolio balances year by year over that 28-year span, forecasting what your portfolio's value might be in good and bad markets. Click on that graph, and it shows how rapidly the odds of your nest egg lasting tail off in the later years.

You can run several scenarios with different assumptions to see how you might improve the chances of your savings lasting as long as you'd like.

Say you'd prefer more assurance than a 77% probability. What moves might you make to boost it?

Many people shift their portfolio toward stocks, figuring that higher potential returns will increase the longevity of their portfolio. But if you try that, you'll see that investing more aggressively won't boost the probability very much -- and may even lower it.

For example, the chances of your money lasting 28 years increases only to 78% -- basically a wash -- if you move to a blend of 60% stocks, 40% bonds. Going to a 100% stock portfolio would actually reduce the probability to 75%.

Even though a bigger stock stake increases your potential long-term return, it also means bigger swings in the value of your nest egg. So while stocks do have big upside potential, they also have more downside potential -- namely, you could run out of money more quickly if stocks perform poorly.

A more effective way to increase the odds of your money lasting longer is to cut back on withdrawals. For example, if you move the spending slider from $30,000 back to $25,000, the probability of your nest egg making it 28 years soars from 77% to 91% -- a much higher level of comfort.

Another advantage to paring withdrawals: You can maintain a high level of assurance that your money will last even with a very conservative investing strategy.

For example, with annual withdrawals of $30,000, a portfolio with just 20% stocks and 80% bonds has only a 66% chance of lasting 28 years. Reduce withdrawals to $25,000, however, and the figure for the same 20%-80% portfolio rises to 89%. What's more, the value of the less stock-heavy won't drop anywhere near as much during market downturns as one loaded up with equities.

Ask the Help Desk your questions about retirement planning

Keep in mind that we're talking forecasts here, not guaranteed outcomes. If you really want to be sure you'll still have money coming in from your savings at 95 -- or, for that matter, even beyond that age -- then you may want to consider putting a portion of your nest egg into an immediate annuity, a type of investment that provides income for life regardless of what's going on in the financial markets.

Whatever withdrawal strategy you decide on, you'll want to monitor it regularly and stay flexible.

That might mean reining in withdrawals or not increasing them for inflation after the market has taken a hit (so you don't run through your stash too soon). Or perhaps increasing withdrawals if investment gains have swollen your portfolio's value (so you don't end up with a pile of cash late in life along with regrets you didn't spend more earlier in retirement).

If you take this approach -- starting with a sustainable withdrawal amount but adjusting if conditions demand -- you stand a good chance of assuring that your money won't give out before you do.

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