Online calculators are fun to play with. Plug in some numbers and — voila! — here’s how much house you can afford, or what your car payments might be, or the impact a good year for the market might have on your portfolio.
Those kinds of online calculators are simple, however. Another set of online tools that are growing in popularity involve much more complex, but perhaps more important, calculations: Retirement calculators. They all seek to answer the same question: Are you on track for your retirement savings? But the number of variables involved in answering that question is considerable. That means these calculators are necessarily more complex, and also more subject to interpretation.
In reality, they are more like pre-populated spreadsheets, and they can look just as intimidating.
But that’s necessary. Think of all the factors that might go into deciding whether you are on track for retirement. Some are, at least partly, under your control. Others aren’t. How much do you have now? How much are you saving? When might you retire? How long do you think you might live? What pots of money might supplement your income in old age — Social Security, pensions, gifts, rents? What will happen to your town’s property taxes? What kind of lifestyle might you live? What kind of expensive health issues might pop up? And perhaps most important, what mood will the markets be in when you retire?
The more sophisticated calculators provide plenty of leeway for these variables and more. But none of them are perfect. As just one example: Most assume a consistent level of spending throughout old age — say 80 percent of current costs. But researchers are pretty confident that’s not how it works. They found that many retired folks spend more during their initial years of retirement when they are traveling the world or pursuing their bucket lists. Yet spending tends to slow as people age.
Still, the real function of these calculators is to educate. As you play with the toggles, you may very well have fresh insights into what you are doing now, such as, “Hey, maybe that Roth IRA really is a good idea, now that I see what tax bracket I’ll be in at age 70.”
So which calculator is right for you really depends on where you are on the retirement planning learning curve. Play with one of these, or all of them, as you see fit. But be warned: When I used my own personal situation with these calculators, I was told everything from I am fully on track for a 30-year retirement to … MAYDAY. So, your mileage may vary. And no calculators can replace the advice of a smart financial professional and your own diligent research.
Vanguard’s calculator is simple to operate: On one screen, you just place sliders where you think they should be. Doing so means you’ve just told Vanguard the number of years you think you’ll need retirement income, your savings balance today, how much you spend each year and your investment allocation among stocks, bonds, etc. Then you “run a simulator” which gives you an estimate on the probability that your money will last long enough. This simulator tries to mimic real life by running through hundreds of possible outcomes and computing probabilities – in a bear market, for example, or a bull market. With one more click, it gives you ranges for your savings balance as time passes – which might disappear entirely, in one simulation or might keep right on growing even as you spend it in another.
Again, this tool can be completed in just a few minutes and it’ll give you a rough idea of where you are at. But it’s really imprecise about spending, where you live and other income sources.
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Still on a single screen, the MarketWatch simulator is quite a bit more complicated – for better and worse. You can answer the same basic questions as above and get an output. But there are many additional parameters, such as Social Security income and slots for pension or annuity or gig income. But you can also fine tune a lot of other inputs and that’s where this tool shines. Under “advanced settings,” you can change life expectancy, raises, growth in medical costs, tax rates, post-retirement investment return and more. For the daydreamers, you can change the slider to figure out at what age you can afford to retire.
This tool can be pretty jarring at first. There are large charts, but they can be hard to understand at first. But what I like about this tool is – it really makes you think.
The Kiplinger tool goes the other direction. Because there are no defaults, the tool is a bit more manual. The user has to estimate what their likely Social Security monthly check will be, which you can get at the Social Security Administration. It also makes users estimate investment returns, a bit of a dangerous game for investors to play. It does include the possibility of using a house as a source of income. Then, it spits out an amount the calculator arrives as that you should be saving each month. That’s a useful number, and ultimately, it’s probably the one you want right now.
The Fidelity MyPlan Snapshot offers just that: A quick at-a-glance number to give you a very, very rough idea of where you stand. The number will feel a bit like a credit score. The tool asks just a few simple questions — your age, your income, your retirement balance, monthly savings, what you think you’ll spend at retirement (more, less, or the same as now), and your risk tolerance. Then, it assumes you’ll live until 93 and tells you where you stand today. You’ll get a two or three digit number indicating you are On Target, Good, Fair or Needs Attention. Then you can fiddle with your inputs a bit to see the impact. You can complete this calculator in under 60 seconds, so that’s good. But it provides the roughest of rough guidelines, so you may want to try at least one other calculator.
The Betterment calculator feels more like a smartphone app. It requires multiple pages and asks simple, bold questions. It asks ZIP code, which is unique and good. After all, where you live says a lot about your housing costs, which in turn might be the most important determinant for how long your money lasts. I found the “spending needed” — and “on track to have” outputs useful. I didn’t like the long delays in between input screens that were marked by the warning “please pardon our algorithms.”
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I found the Bankrate tool to have the best middle-of-the-road blend of simplicity and variables. The entire tool fits on one screen. Sliders make inputs easy. The defaults are reasonable, so you begin at an understandable starting place. It’s not as precise as the MarketWatch tool and doesn’t have quite as many options. But it’s easy to adjust inflation, Social Security and investment return inputs. A simple chart shows your savings rise … then trail off as old age hits. Plus, Bankrate says my money will last until I’m 87. That’s not bad. Which means I’d better start saving more or stop exercising and eating healthy.
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Bob Sullivan is a veteran journalist and the author of five books, including the 2008 New York Times Best-Seller, “Gotcha Capitalism,” and the 2010 New York Times Best Seller, “Stop Getting Ripped Off!” He specializes in computer crime and consumer fraud stories. He has won the Society of Professional Journalists Public Service Award, a Peabody award, and the Consumer Federation of America Betty Furness Consumer Media Service Award. He’s now a syndicated columnist and frequent TV guest. He is also co-host of the podcast Breach, which examines history’s biggest hacking stories. Opinions are his own.
Bankrate is a registered trademark of Bankrate, LLC.
Betterment is a registered trademark of Betterment Holdings, Inc.
Fidelity is a registered trademark of FMR LLC.
MarketWatch is a copyright of 2019 MarketWatch, Inc and Kiplinger is a copyright of The Kiplinger Washington Editors.
Vanguard is a registered trademark of The Vanguard Group, Inc.
Haven Life Insurance Agency offers this as educational information only. Haven Life does not endorse or offer the companies, products, services and/or strategies discussed here.
Haven Life doesn’t provide tax, legal or investment advice. This discussion is intended as general education only. We encourage you to work with your own personal tax or legal professionals and your financial advisor. Opinions expressed by the author are their own and do not necessarily represent the views of Haven Life.