Planning for retirement may be difficult. Not knowing what kind of income savings plans may leave some facing financial problems when they retire. Using a retirement calculator in advance may help assess potential income, shortfalls and ways to boost savings. What can retirement calculators do and how useful are they?
What is a Retirement Calculator?
This kind of calculator is an online tool that helps an individual work out how much they may get when they retire. In basic terms, the individual will input a range of data and will then be given a projection of income and how long it may last.
What do Retirement Calculators do?
The services offered by these tools may vary. Some will give a basic analysis; others may give a more in-depth solution. Typically, a retirement calculator may tell the individual:
- How much their retirement savings are likely to be when they retire.
- How much their social security benefits may add to their income if applicable.
- How long their savings may last for based on an estimated annual spend.
- Whether they may need to boost their savings to get an acceptable retirement income (some will also show ways to do this).
Some may use a calculator and be happy with the retirement income it shows them. Others, however, may worry that they won’t have enough cash to survive on. Can retirement calculators help there?
How to Use a Retirement Calculator to Boost Potential Income
Some calculators add on useful features that may help individuals boost their potential income. They may, for example:
- Allow the individual to change the data they input to see how this would improve their situation.
- Make specific recommendations on how to boost retirement savings and change planning to get the income they need.
So, for example, the individual could increase their contribution percentage a few times to see how this would alter the estimate. Or they could use the retirement calculator’s advice (if offered) to see specific recommendations that might help. Some tools may, for example, recommend that the individual defers retirement for a specific number of years or boosts their percentage of savings by a specific amount.
Bear in mind that a retirement calculator may be a useful tool but it cannot necessarily give a completely accurate picture. Interest rates may change and earnings may fluctuate. The advice taken here should always be impartial. Some calculators may be used as sales tools by companies hoping that individuals will retain their services. These may be best avoided.
Used as part of an overall retirement planning process, however, this can be a useful tool that can help many to boost their retirement savings so that they really can enjoy their later years. It may also be useful to set up a retirement spending budget to assess how much income will be needed. Those that then find that they have to improve their prospects may need to take early action to increase the money they have to play with.
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
Join the Conversation