4 Tips for Using a Financial Calculator to Plan Your Retirement

Written by: Mike Valles

When making plans for your retirement, a financial calculator will help you to understand what you need to do. By doing so, it will also let you know whether or not your goals are actually feasible or not, and some of them can help you with a lot of features that will help you fine tune your plans and give you much better results. Here are 4 tips to help you get the most out of a financial calculator for your retirement.

Use More Than One Retirement Calculator

There are many different kinds of financial calculators online and each one is designed to look at factors a little differently. Some will allow you to enter in more details than another one, and each one will give you different results. This makes it necessary to check your goals against more than one calculator.

Some calculators are very basic and only allow you to enter a few numbers. The fewer numbers you enter, the more general you should consider the results. This general one at Bloomberg.com would be good if all you want is a ballpark figure.

The financial calculator at AARP will let you enter a lot of variables, including being married or single, and whether or not your spouse will also receive benefits. You can choose what age you want to retire and the age at which you will start receiving Social Security. One at the Department of Labor lets you enter even more details.

A financial calculator is available for almost everything you could think of for retirement. There is one for the event that there is no Social Security, for figuring out how an early withdrawal will affect your retirement account, and another one if tax laws change

Use a Calculator to Help Determine Best Asset Allocation

A financial calculator at TIAA-CREF.com helps you understand how your risk level affects your retirement package. It reveals four sample projections so that you can see how your investment decisions will affect your retirement savings.

Realize That a Financial Calculator Makes Some Assumptions

Even the best calculators may make some assumptions. You need to know this so that you realize that there is a margin of error. To name some particulars, some calculators assume a particular interest rate, that you will live a certain number of years, that inflation will be at a reasonable rate, etc.

Check Your Retirement Plan Against Worst Case Scenarios

One financial calculator called FireCalc will help you see what might happen to your retirement funds under different scenarios. This calculator will show you what would have happened in actual situations of the past. This projection will help you be sure that if it could survive what has happened, then you can be almost guaranteed that it will survive the possibilities of the future.

When you calculate your expected retirement needs and projected savings, it is necessary to try several scenarios and see how it will affect you. You also want to run the scenarios for both you and your spouse, to ensure that there will be enough money to meet the needs, such as if one of you lives longer than expected.


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