The retirement calculator is an excellent retirement planning tool because it makes it easier for people to get a more accurate picture of what their financial needs will be in retirement. But this free tool can only help you plan for retirement if you actually incorporate what you learn into your own retirement planning.
Live the life you want in retirement by planning accordingly.
Below, we discuss 6 ways that retirement calculators can help you create a more effective plan for retirement:
1. Get an accurate look at how much you need to save.
You know retirement planning is important, but how do you determine how much you need to save? According to a Transamerica survey from 2014, 50% of American workers have guessed at how much they need to save, and one in five makes this estimate based on current living expenses. Only 11% of workers have actually used a retirement calculator to figure out if they are saving enough.
Estimating retirement needs based on a guess is not the most accurate way to determine your retirement savings goals. Retirement calculators take the guess work out of calculations, helping you get a more accurate look at how much you really need to save. By using this number as a starting point, you can create a more effective retirement plan.
2. Assess all options for financial security.
Not able to save more? Don’t worry, a retirement calculator can also help you find alternative ways to fund retirement — using home equity, getting a retirement job and cutting expenses are all viable ways to have a secure and happy retirement.
A really good retirement plan is not based on a single number. There are hundreds of inputs and decisions that you can make that can give you the retirement you really want to have.
Retirement calculators can help you make more informed decisions while planning for retirement.
3. Set achievable retirement savings goals.
After you’ve determined how much you need to save to support yourself in retirement, it’s time to evaluate your retirement savings goals. Use the information that you gather from the retirement calculator as a starting point for setting specific and achievable goals that will help you save enough to live comfortably in retirement.
For instance, if you find that your retirement nest egg will not last as long as you initially thought it would, it’s time to set new goals to close that savings gap. Having an accurate picture of your retirement needs not only helps you set more specific goals, but it is a necessary step in finding the appropriate strategies to meet those goals.
4. Adjust your investment strategies accordingly.
Retirement calculators don’t just tell you how much you need to save in order to sustain your lifestyle in retirement. They can also help you determine if your current investment strategies will be enough to get you where you need to be to meet your goals. There are a variety of retirement calculators that help you determine things like how much income you could receive from a fixed annuity or how much you should convert to a Roth IRA.
If you find that your current investment strategies will not provide you with the income you need, it’s time to adjust your plan. Using free retirement planning calculators is a great way to determine which strategies will help you meet your goals and which strategies you need to adjust.
5. Get comfortable with the idea of retirement.
Retiring is a big deal. You have to be comfortable that you (and your spouse) are financially secure for the rest of your life — no matter how long that turns out to be. A good retirement calculator will help you assess all of your resources and project your finances into your future.
You should be comfortable that you won’t run out of money in the future. And you want to be sure that you can afford the lifestyle you desire as well as adequate healthcare.
6. Set a Date for Retirement.
The biggest retirement decision you face is when. When will you retire? When can you retire? When can you begin this next stage of your life?
A retirement calculator can help you figure this out. Whether you are aiming for an early retirement or if you intend to work as long as possible, you want to make sure that your future is financially secure when you call it quits.
Retirement is closer than you think.
Though no retirement calculator is perfect, this tool does help you better understand the complexities of saving for retirement. Though retirement planning can often be a daunting task, the retirement calculator helps break it down into understandable numbers that are easier to work with.
