In the last ten days I have received year-end statements from all three of my retirement accounts. The arrival of these financial statements presents great reminder to do a retirement check-up. Now is the time to do a calculation to see whether your retirement investments are on track to give you a comfortable retirement.
There are many retirement calculators on-line; most investment firms have them. They’re not all the same; different calculators present information in different ways, using different assumptions and perhaps emphasizing different aspects of the situation.
Calculators often have built-in assumptions about things like inflation, life expectancy, or investment return. With that in mind:
- Try to identify the key assumptions built into each calculator.
- Use a variety of on-line calculators, rather than sticking with just one. Looking at the different responses you are given by different tools will make you familiar with a wider range of possibilities.
Most on-line calculators are commercial; they are posted by companies that have products or services to sell. Keep that sales motive in mind as you review the information you receive. Occasionally, a tool will subtly steer consumers toward a particular type of product. By being aware, you can avoid making decisions based on biased information.
Fortunately, there are free non-commercial retirement calculators available on-line as well. Here are two provided by non-commercial organizations:
- Ballpark E$timate – This tool is, as its name suggests, a ballpark estimate. It doesn’t go into great detail. It is especially appropriate for people who are a long way from retirement, don’t have detailed retirement goals, but just want to be sure they’re on track.
- Department of Labor Retirement Calculator – This tool provides detailed on-line worksheets for examining retirement expenses as well as your income. It is particularly useful for those who are fairly close to retirement and ready for more detailed planning.
If you work with a financial adviser, he or she plays a key role in your retirement planning; even then, however, it is wise to take an active role in the planning. Your adviser will be the first one to tell you that you must be the one to make the final decisions.