Retirement Calculators

Author: Rex Truman

| Posted: 17-01-2008 | Comments: 0 | Views: 17 | Rating: (55)

(?)

A retirement calculator is one of the most useful things you can use when planning your retirement savings. You see most people plan for retirement without any idea of how much they need to save, or how much they want in retirement. A retirement calculator provides the answers.

A retirement calculator shows you how much to need to save to get the income you need when you retire. Or it may be how much you want! That depends how much you are making, and how young you are. Either way do use a retirement calculator.

You can find a retirement calculator on many web sites, so you do not need to get the services or a retirement planner or investment advisor to find the answers. In this way, you use the retirement calculator, calculate the amounts you need, and then visit an investment advisor or retirement planner.

To decide how much you need to save, you need:

1. The income you need to live on at today's prices
2. The rate of inflation per annum between now and the retirement date.
3. The rate at which your fund will grow.

Let's go through these and how they relate to a retirement calculator. First, how much do you need to live on? Remember, that retired people do not normally spend as much as people who work. When you retire, you won't need:

special clothes for work the sort of car that keeps you up with the Joneses
you will be able to take holidays at off-peak times
and you will have time to do things - instead of paying to get them done.

So your costs will be lower. So let's say you are earning $60,000 a year now, you might think that $50,000 would be enough. Next you need to remember that if you are healthy, you expect to live for 15-20 years, and so need to allow for inflation in that period - so actually you need more! This is where a good retirement calculator comes in.

2. The next thing the retirement calculator needs is the rate of inflation, or what you expect it to average until you retire. With the price of oil going up, we know that inflation over the next decade will be higher than it is now. Official figures put inflation at around 2-3%, but the true figure is more like 5%.

This means that you need to allow for at least 5%, and probably 7% and feed that into the retirement calculator.

4. At what rate will your retirement plan grow? A difficult one this. Five years ago, people were talking in terms of 10%, but not now experts suggest a lower figure. The problem is that a retirement fund or retirement plan has to be prudent - you don't want to wake up one morning, a year or before you retire, to find that a crash on Wall Street has cut the value of your fund by 30%. You just won't have the time to get that money back.

So you will be doing well to get 10% return, but could almost guarantee 5-6%. Maybe 7-8% would be a realistic figure to put into the retirement calculator.

The retirement calculator is just some software set up to make a calculation after you enter some figures. As I said earlier, the retirement calculator needs:

Required income
Inflation
Expected return
And of course, how long till you retire.

Here are some results from a retirement calculator:

Required income: $30,000 per annum
Years till retirement: 15 years
Annual inflation: 2.5% (unrealistic)
Annual yield: 5%

Income needed in 15 years: $43,448
Required value of retirement plan in 15 years: $825,000

Quite a lot of money for a modest retirement income. Here's another one:

Required income: $30,000 per annum
Years till retirement: 20 years
Annual inflation: 5%
Annual yield: 8%

Required value of retirement plan in 20 years: $987,573

If you want an income of $45,000 when you retire - equivalent to less than $30,000 today - you will need: $148,000.

When you use a retirement calculator, make sure you use one that does calculate the income you will get at retirement adjusted for inflation - over 20 years, you will need 50% more than think you need today. If you do this, then you will benefit form using a retirement calculator.

Rate this Article:

Current: 0 / 5 stars - 0 vote(s).

Article Tags: Retirement Planning, Retirement, Retirement Funds

Article Source: http://www.articlesbase.com/finance-articles/retirement-calculators-308168.html

Print article

Send to friend

Publish this Article

Author feedback

About the Author:
Rex Truman is not retired but should be - instead he gives information at RetireWhenULike.com to help people save enough so they can enjoy retirement, ideally with an interesting job where they are in control.

Submitting articles has become one of the most popular means of generating quality backlinks and targeted traffic to your website. Join us today - It's Free!

Article Comments

Add new Comment

Spreading Your Risk In A Retirement Fund
By: Rex Truman | 17/01/2008 | Finance
Whatever type of retirement fund you have, be it 401k 403b, Roth IRA or plain old IRA, you want to spread your risk. Stocks go up and go down. Treasuries and government backed bonds are very safe, but they also go up and down in value, although you will always get...

How To Cushion Yourself Against Inflation
By: Rex Truman | 18/01/2008 | Finance
The biggest problem facing you when you plan your retirement fund - or start taking the money - is inflation. You may have fallen for government statistics that show inflation is low. Don't believe it! The official figures understate inflation, probably by 70-100%. In other words, if they say inflation...

Winning Or Losing The Financial And Retirement Race
By: Nancy Hendrickson | 09/04/2007 | Finance
Mr. Lamoreaux is a knowledgeable estate planner with more than 35 years of experience in the financial field. He offers his wisdom in a simple manner that lay people can easily understand. As more and more Americans begin to look toward retirement they realize they must have a plan. Mr. Lamoreaux...

Let’s Refire Together!
By: Dr. Cynthia Barnett | 08/07/2007 | Self Improvement
Wouldn't you rather Re-Fire than retire? Leading Retirement Lifestyle expert, Dr. Cynthia Barnett, explains why her retirement preparation process invites you to re-fire and enjoy a sedond stage of life filled with passion, purpose, and pizzazz.

Five Strategies for Having Enough Money for your Dream Retirement (while You're Still Breathing!)
By: Lin Schreiber | 20/08/2007 | Finance
Most people think that's all retirement is about -- having enough money to sit on the deck, play golf, and visit the grandkids. But that's the old model -- not today's retirement. Someone who turns 65 today can expect to live until age 83, according to the US Bureau of Labor Statistics. Here's 5 strategies to help you pursue your dream retirement:

Saving for Retirement - the Truth
By: Harold L Lowe | 12/12/2007 | Personal Finance
Here is something about "truths" that you may not have considered. Some "truths" may be unreliable because some of them change. Do you remember accepting visits and gifts from the Tooth Fairy as the truth in your childhood? Is a visit from the Tooth Fairy a truth for you today? What about your beliefs about Santa Claus? Are they the same today as they were when you were a child?

Recession Proof Your Retirement Without Stress
By: Ruth Klein | 14/05/2008 | Finance
We all need to recession-proof our retirements. These nine steps from America's De-Stress Diva, Ruth Klein, will help remove the stress from yours.

Book Review: Winning Or Losing The Financial And Retirement Race
By: Nancy Hendrickson | 09/04/2007 | Finance
Everyone alive today is running in the retirement race of their lives, according to Robert Lamoreaux, author of Winning or Losing the Financial & Retirement Race. As with any race, there are rules to be followed, and times are kept to determine the winners and the also rans. Robert Lmoreaux...

Got a Question? Ask.

Ask the community a question about this article:

Q&A Powered by:

Latest Finance Articles

Overseas Property Buyers Loving the Credit Crunch
By: Nicholas Marr | 06/09/2008
International real estate industry has been bracing itself for the global slowdown but as author Niocholas Marr explains for some this is the nest time to make that purchase of an overseas property

Net Operating Income and Real Estate Analysis
By: James Kobzeff | 06/09/2008
Discover the various ways net operating income gets used in real estate investing and learn how each is calculated.

Financial Security Planning in Uncertain Job Climates
By: Marilyn Katz | 06/09/2008
Nobody can predict every possible emergency or financial problem, but every can do their best to plan for the unexpected.

3 Things You Need to Know About Secured Credit Cards
By: Sean Masterson | 06/09/2008
Think you understand the ins and the outs of secured credit cards? There's actually quite a few misconceptions that many have about these particular financial tools. If you want to make an informed credit card decision when choosing a secured card, there are three things you absolutely must know.

Stock Market Volatility Helps In Making Money Using Stocks
By: Amit Kheterpal | 05/09/2008
Anyone who has ever ventured into the stock market would have gotten to know by now that the index can go up and down on any given date. That gyration can actually help you make good returns on the stock market.

Tips On How To Diversify Your Risk In The Stock Market
By: Amit Kheterpal | 05/09/2008
Stock market is not for the faint hearted they say. That is definitely correct and a lot of people who join the stock market bandwagon hearing stories about loads of money to be made usually are the ones who burn their fingers in the stock market very easily.

Making the Most of Your Business Banking Relationship
By: Ann Knapp | 05/09/2008
Anyone who owns a business can appreciate the need for a bank account to handle bill paying, deposits and payroll. But banks can assist business owners in so many other ways as well. In fact, having a reliable financial partner can help a business reach its greatest potential, as well as provide support during times of financial need.

10 Sound Budgeting Tips to Ensure Financial Freedom
By: Michael New Jr. | 05/09/2008
Here are 10 sound budgeting tips that will surely get you on the right track again. If you're in trouble with debt, this article is a must read!

More from Rex Truman

Article Categories

Article Marketing

Article Notepad

Stop Duplicate Content

Term Papers

Follow ArticlesBase at http://twitter.com

Need Help?

Sign up for our email newsletter

Receive updates, enter your email below

Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
Copyright © 2005-2008 Free Articles by ArticlesBase.com, All rights reserved. (1.10, 16)

Retirement Calculators

Article Comments

Related Articles

Got a Question? Ask.

Latest Finance Articles

More from Rex Truman

Need Help?

Site Links

Webmasters

Business Info

Sign up for our email newsletter