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Senior Retirement Tips :: Simple Retirement Calculator
Simple Retirement Calculator: Finding a Simple and Easy Retirement Calculator That Works
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It seems like every investment and 401(k) company has been rolling out a new and complex retirement planning tool every week, but forgetting the need for a basic and simple retirement calculator. The idea is to be as precise as possible when helping you estimate the size of your nest egg, but so many are getting lost in the numbers.
Despite the increasing complexity and sophistication of these free retirement calculators, they can all produce different results, varying from dizzyingly confusing to overly simplified.
One may make adjustments for disappearing expenses (college tuition or mortgage payments) while another won't. One may account for higher inflation rates with health care (typically double the national standard) while another will not.
And if you don't understand the results, or get the right ones – it could put your retirement at risk. Underestimating how much you need to save could leave you with a retirement shortfall, while overestimating can cut into your money now – meaning you have to sacrifice expenses like college tuition or extra payments on your mortgage.
However, there is a way to get the most out of simple retirement calculator tools. To learn how, keep reading.
Use More Than One
Don't just rely on a single online retirement calculator to base your entire retirement future on. Instead, try several and pay close attention to which ones ask questions that are more pertinent to your current financial situation.
Merge Your Results
You also have to look at how each of these calculators evaluates your results and then merge all that diverging advice. For example, Morningstar, a company that advises 401(k) plans estimates that people need about 70% of their pretax and preretirement income.
Meanwhile Fidelity's online tool suggests you need about 85% of that income. That's a major difference and can result in two vastly different recommendations for savings.
Look For Features, But Not Too Many
Customization is great, it allows you to fine tune a retirement calculator to your own personal needs and financial situation, but it can also make the process more complicated.
Try a calculator like the one offered by the Employee Benefits Research Institute (http://choosetosave.org). It allows you to input extra income sources, potential expenses like travel or lifestyle choices that could affect your savings needs. At the same time, it's simple and easy to follow.
Consult With a Professional
A simple retirement calculator can help you gain an understanding of your financial picture, but your best bet is to also consult with an investment and financial planning professional. They can help you walk through plans, understand your investment options and merge your retirement goals with your current financial situation.
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