DTR Calculator Download

DTR® Calculator

Dr. Hal Forsey, and I, are pleased to offer another model we developed that will calculate the return a Defined Contribution participant needs to earn in order to achieve a desired pay-out.  We call this the Desired Target Return® or DTR®.[1]  Using the Department of Labor actuarial tables for male or female the model calculates the DTR with only 6 inputs.

Click here to download the DTR Calculator that will point you in the right direction:


After you download the DTR-Calculator.jar file double click on the icon.

If it does not open, download either the 32 bit (i586) or 64 bit .exe file and install.

Double Click again on the.jar icon.

You will see the following screen:

Click on the “Calculate DTR” tab.  The DTR of 7.9% will appear as shown below.  Our research indicates that 60% equity or more will be required to earn around 8%.  That’s right, this does not imply a precision to 1/10th of 1%.  This is only a guide post to get you headed in the general direction.  In our research we used 4%, 6%, 8% 10% and 12% as guideposts and we found these break points to be sufficient for portfolio construction purposes.


Suppose you are not a male.  Click the New tab and then click on the F button. Now click “Calculate” and you will see that the Department of Labor actuarial tables estimate that you will probably need to earn 9% compounded until you retire because women are expected to live longer than men.


In order for a woman to reduce her risk to that of a man of 30 she could increase her contributions.

Go up to “Current Annual Contributions”, click on the “slider” to the right of 3500 and move it right to 4550 and you will see the DTR change to 8%.

But what if you are 50 years old, not 30 years old?

Click the “NEW” tab and change the age to 50 then click, “Calculate” to see that the DTR is now 20.4%

How much longer would you have to wait to be able to retire without taking more risk?

Move the slider to the right of “Projected Retirement Age” until the DTR is 8%.  No way are you going to be allowed to work until you are 80 years old.  So start adding to your retirement assets (move slider to the right), or start an IRA.

Now Comes the Hard Part:

You will need to find someone who can construct a portfolio for you that might compound at your final DTR between now and your eventual retirement. We wish you lots of luck…

Because, all of the traditional portfolio construction frameworks available to investors ignore any future payout that will be needed and they ignore the direction to the financial destination.

The most popular framework for investing is an asset management framework, e.g., the Capital Asset Pricing Model (CAPM).  The basic assumptions of this framework are that future payouts are irrelevant, just make as much money as you can, given your tolerance for risk and hope for the best.  Proponents of this framework almost always favor a heavy allocation to equities.  The other popular framework views future payouts as liabilities and therefore uses liability driven investment strategies (LDI). This framework is almost always invested heavily in fixed income securities no matter what your contribution schedule is or where interest rates are.

To illustrate the importance of the DTR:

Assume you want to send a valuable package to New York. Asset Management advocates don’t care where you are sending it from or where you want it to go.  They assume you want to send it as far as possible as fast as they can.  LDI proponents put all packages on a truck no matter how far it needs to go or when it needs to get there.  Neither one bothers to determine the direction to send it, due to their myopic concern about which vehicle to choose.

PMPT assumes you are trying to transport your portfolio from where it is to where it needs to be at some specific time in the future in order for you to use its contents for a specified cash outflow.  Well, we built an optimizer that measured risk and reward relative to a DTR and gave that software away in a book by Dr. Steve Satchell at Cambridge University and myself.  The title is, “Managing Downside Risk in Financial Markets, Amazon.com”

Oh, I almost forgot.  There is one other framework that claims: all they need to know is your age In order to determine what vehicle to put your valuable package on.  It is called: “Target Date Funds” Target Date Funds also neglect to determine what direction to take.  So, they know when it has to get there, they just don’t know where or what the target is.  Low tech snake oil.




[1] Desired Target Return and DTR are registered Trademarks of Dr. Frank A. Sortino


About Frank Sortino

Frank Sortino is finance professor emeritus from San Francisco State University and Director of the Pension Research Institute which he founded in 1981. For 10 years he wrote a quarterly analysis of mutual funds for Pensions and Investments Magazine and he has written two books on the subject of Post Modern Portfolio Theory. He has been a featured speaker at many conferences in the U.S., Europe, South Africa, and the Pacific Basin. Dr. Sortino received his Ph.D in Finance from the University of Oregon and has carried out research projects with many institutions like Shell Oil, Netherlands and The City and County of San Francisco Retirement System.
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2 Responses to DTR Calculator Download

  1. Jill Kismet says:

    Thank you for this generous calculator. Is there a different way of accessing it. My computer is balking at the new software required and “hazards”. Just inquiring if after a couple years if there was another option for pro-bono use? Thanks, Jill Kismet, PhD, CRPC

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