Retirement planning isn’t something most people consider fun. But it is an essential task, especially with the uncertainty surrounding the future of Social Security and the growing trend of fewer pension programs, especially in the private sector. That doesn’t mean, however, that retirement planning needs to be overwhelming. The key is to take a few minutes and think about your retirement goals – how you envision your retirement, when you want to retire, and how you expect t fund your retirement.
Once you do that, take stock of how much money you have already saved, how much you are currently saving, and any future income you may have, such as pensions, Social Security, investments, rental properties, etc.
Once you are armed with this information, you can sit down with some retirement planning tools and get a better idea of what your retirement may look like. Based on these exercises, you can help create a better retirement plan and help determine how much you should be saving each month to reach your goals.
A note about retirement planning: Retirement planning is as much an art as a science – due to the unpredictable nature of investing, it’s impossible to determine exactly how much money you will need, how much you should invest, and how long it will take to reach your savings goals. Because of these variables, I recommend using a range of estimates and being conservative with your numbers and estimates. Hopefully this will give you a cushion in your estimates and help you achieve your retirement goals more quickly if your investments do better than expected.
Online Retirement Planning Tools
Here are a few retirement planning tools to help you create a plan to help reach your retirement goals:
Personal Capital – Free Online Portfolio Management
Personal Capital is my favorite online investing tool. It is incredibly powerful, and more importantly, free to use! Here is how it works, and why you should check it out: You start by opening an account, then linking your investment accounts to it. You can link a variety of accounts, including your checking and savings accounts, investment accounts, CDs, credit cards, and more. Personal Capital will then sync your data and give you an overview of your financial accounts.
The most powerful part of this tool is the asset allocation feature. This allows users to see exactly how their assets are allocated, which can be incredibly difficult to do if you are investing with different mutual or index funds. Users can also set a target asset allocation based on age and investment risk tolerance and Personal Capital will compare your actual portfolio to your preferred portfolio, making it easy to see where you can make changes to your investments.
Security is also top notch – the founder of Personal Capital is the former CEO of Intuit (Turbo Tax, Quicken, and Mint.com) and he founded an internet security company. They use military grade security to protect your data. You can sign up for a free account, or read our Personal Capital review to learn more.
QuickAdvice – Investment Calculator
Quick Advice is a basic calculator which will quickly project your retirement income based on the inputs you provide. Just type in your basic info (age, estimated retirement age, salary, other income), then enter your retirement savings and non-retirement savings, current asset allocations, ongoing investment contributions, and other expected retirement income, such as a pension. Click return and the tool displays three numbers which represent a monthly retirement income based on weak, average, and strong market conditions. This can help you plan your retirement as long as you have a decent idea of what your expenses will be when you retire.
RetirementCalculator.com offers more than just a quick way to run some retirement calculations. The blog and written content are where the real value lies, with articles on retirement planning with IRAs and 401k plans, life insurance, assisted living, reverse mortgages, and related topics. Of course, you can always use the retirement calculator on their site to run a few numbers to help you calculate how long your retirement savings will last.
Maximize My Social Security
The future of Social Security is uncertain, but that doesn’t mean that you shouldn’t try to optimize the benefits that you could still receive from the program. Neglecting your Social Security benefits could cause you to miss out on thousands of dollars in benefits. You can always use the Social Security retirement estimator at SocialSecurity.gov to get a rough idea of your future benefits, but if your situation is more complicated, then it may be worth looking into a tool such as Maximize My Social Security, which costs $40 annually. This tool can help you determine the best strategy for maximizing your social security benefit. This tool can be especially helpful when you may need to decide when to collect retiree, spousal, survivor, divorcee, parent, or child benefits.
FIRECalc takes a different approach to retirement planning. Instead of trying to help you determine how much money you need to save each month, FIRECalc helps you determine the odds of your money lasting throughout your retirement. This tool uses historical data going back to 1871 to help you understand how long your money would have lasted under previous conditions. I know what you’re thinking – past returns don’t guarantee future results. And that is where this tool is different from most other calculators on the market.
FIRECalc compares your savings and withdrawal rates to previous returns on the stock market to determine how successful a similar situation would have been in the past. The premise behind this tool is that if your portfolio would have withstood the Great Depression, periods of high inflation and stagflation, as well as multiple recessions, then your portfolio stands a decent chance of being able to withstand whatever the future might bring. It’s not a calculator in the traditional sense, but almost more of a risk management tool for investment portfolios.
DinkyTown – Various Financial Calculators
DinkyTown specializes in financial calculators, covering a variety of topics including retirement, mortgages, taxes, credit cards, loans, and more. This example is a Roth 401k versus 401k calculator which can help you determine the long term effects of investing with a Roth 401k or a Traditional 401k. This site is great for people in all stages of life, not just those planning their retirement!
Optimal Retirement Planner
The Optimal Retirement Planner (ORP) is a robust calculator which takes taxes and other variables into account. This is important when you want to maximize your after tax income each year — for example, when you have retirement plan investments which have a different tax status, such as a Traditional and Roth IRA. this calculator takes more factors into account than most retirement calculators found on the web, and it takes a little more time to fill out the information. This tool is more valuable if you are already near retirement as it requires more detailed inputs than many other calculators.
Do you have any retirement planning tools to recommend?