Retirement Income Calculator
A retirement income calculator can be quite helpful in assessing how much an individual needs to accumulate before entering retirement.
Individuals already retired can use a retirement income calculator to gain insight into how long they can expect current assets to last based on their current consumption.
Virtually all online retirement calculators assume that the individuals using them will be younger than retirement age and are seeking to learn what they will need to establish as a savings and investment target before they can make the decision to retire.
Those retiring from the armed forces should consider a more tailored military retirement calculator, while government or Federal employees are recommended to consult a suitable FERS retirement calculator.
The Effect of Inflation On Your Retirement Income Calculator
Not many online retirement calculators appear to provide a complete picture, however.
Even retirement calculators that include existing investment portfolios generally fail to account for expected future inflation.
This is understandable in that there is intense disagreement among economists and financial experts regarding the path of inflation in coming years. Some say that the borrowing and money printing that has been going on over the past few years will decimate the economy in the future, but others argue that neither will present any particular long-term problems.
Calculator programmers can be forgiven for being shy about addressing the inflation issue, but calculator users need to be aware that it likely will directly affect their economic futures.
Where To Find A Retirement Income Calculator
Investment sites offer retirement calculators that appear to focus on those with incomes high enough to enable them to build attractive investment accounts. As example, the retirement calculator at T.RowePrice assumes that the user has mutual funds as well as individual stocks, along with other investment vehicles.
In a more general approach, the popular WalletPop.com site requests that site visitors address each of fifteen questions individually. These questions include subjects such as current income, current savings, future income requirements, the future of Social Security, inflation’s role, how expenses will change after retirement and other related issues.
Thus the individual with great concern about future inflation – or any of the fourteen other considerations – can include that in the WalletPop.com calculator’s projections, and one with less concern can choose not to address it at all.
This general approach serves to provide a very general idea of what future finances may look like after retirement, which can assist the individual in determining how much he should be saving at present.
Given that there is so very much disagreement among financial experts in areas dealing with inflation, Social Security’s future health and other issues that will affect any retired individual’s financial position, the general picture may be the best that any online retirement income calculator can provide.
Still another approach is that used by Smartmoney.com, which addresses portfolio value only and does not consider income from Social Security or the value of any assets or debts. The basic calculator there asks the site visitor for a portfolio value and number of years the portfolio needs to last. It assumes a 7% after-tax return and a 3% rate of inflation unless the user changes either or both of those values. Those wishing to be more precise can move to the site’s Retirement Planner, which provides visual graphics and slide buttons for current age, retirement age and annual savings.
Regardless of which type of calculator the individual chooses to use, he or she will need to make choices in areas where experts remain in disagreement. Each retirement income calculator type provides additional insight, however, and can be combined to suggest an appropriate starting point for retirement planning.
