Retirement Calculators
From LoveToKnow Seniors
Retirement calculators serve as tools to help identify retirement needs and determine investment strategies. The goal is have enough saved to see you through your retirement years.
Plan Ahead
It’s never too early to plan for retirement. The average life expectancy in the United States today is 77.82 years. With lengthier life spans, comes longer retirements. With that in mind, how much do you need to save to retire?
Retirement calculators can help plan for the future. However, even when using a calculator, remember that interest rates and tax laws change regularly and may affect the bottom line. It is best to run calculations once a year to stay current and make provision for changes affecting your financial picture.
How Retirement Calculators Work
Many online retirement calculators allow users to fill in the blanks when designing individualized retirement goals based on income. These online planners forecast post-retirement income including Social Security, pensions, and accounts such as trusts and annuities.
Retirement calculators draw financial information into one place to give an overall picture of your current financial health, including existing balances and annual contributions to 401Ks, IRAs, or other tax-deferred accounts. The calculator then presents various portfolio options, allowing individuals to select the retirement strategy that works for them.
Pension or Defined Benefit Plan
A defined benefit plan is one option to consider when examining factors to include in your retirement plan. Employers can contribute more to a pension or defined benefit plan than to other types of plans, and because benefits are not dependent on asset returns, defined benefit plans provide substantial benefits even when retiring early. Employee benefits are sorted based on salary history and length of employment.
Advantages of a defined benefit plan:
- Participants are allowed to contribute to other retirement plans.
- Benefits cannot be retroactively decreased
- Potential for considerable benefits in a short period of time.
- Employers can to contribute more than under other retirement plans.
Living Expenses
To plan for the future, you need a clear idea of how much money you’ll need to live when you retire. In order to determine this, factors such as cost of living and special interests or activities you enjoy, and even future home health care possibilities should be taken into consideration. If you want to keep the same standard of living you enjoy pre-retirement, it is estimated you’ll need to bring in 60 to 80 percent of your pre-retirement earnings.
Estimate what you spend on essentials including food, medical, dental, clothes, utilities, insurance and taxes, because these expenses will continue as you enter retirement. Some expenses will go down while others will not. Will your mortgage be paid off? As you plan for retirement, review your financial needs annually as your financial situation changes.
Investments
Investing is another way to achieve higher retirement benefits. Sound investment strategies do not essentially mean the safest strategies. A moderate amount of risk may boost your average annual return over time. This can make a difference in the level of comfort and satisfaction you enjoy in retirement.
The safest investment route is to hold government treasury bills and short-term government bonds. They provide a return on money invested, plus interest at a return of no more than 5 percent per year. For maximum return over time, this approach has its shortcomings but little risk. Traditionally, stock markets produce a higher average rate of return than treasury bills or bond investments. Investors with 5 to 10 years until retirement should consider some stock ownership in their portfolios. Portfolios diversified into bonds, T-bills, and domestic and foreign stocks, provide the best return and lowest risk over time.
Projections and Retirement Calculators
Is your retirement projection on target to attain independent living? Using a retirement calculator will help identify shortfalls before it’s too late. Remember, in order to live at the same standard you enjoy before retirement, you’ll want to plan to bring in 60-80 percent of your pre-retirement income. With the aid of a retirement calculator, you’ll learn where you stand financially compared to where you should be. Equipped with this vital information, you’ll know what steps to take to reach your retirement living goals.
This page has been accessed 722 times. This page was last modified 16:02, 6 February 2007.
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