Preparing for Retirement Part 2
Obviously an important part of retirement planning is saving and investing. How will you know how much you need to invest? How will you know how much you will need during retirement and for how long? There are very important, yet unknown variables when it comes to retirement planning. Having some ballpark figures to work with is a good start
even though they are not etched in stone. That’s where retirement planning calculators come in. But first you need to be aware of your budget, what I call a Financial Empowerment Plan (FEP) and you’ll need to estimate what your future costs will be based upon possible inflation rates and any planned increases in spending.
I like comparing results using different retirement planning calculators. I've been retired for 16 years but I'm still "planning" since I may just have 30 more years to live. I find that all of the calculators I’ve used have shortcomings. Some do not include enough key variables to give realistic results and others make assumptions that cannot possibly be applicable for every user. I came across a calculator that discounted pensions. I know pensions have just about gone the way of the dinosaur but some of us still have them. To leave out one of the most important sources of income, if not the most important, negates the validity of the figures this calculator produces. The calculators that come closest to being adequate for my purposes are MSN's retirement calculator (concise)
and CNN's Money 101 calculator, more detailed: http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner_101.jsp
Unfortunately, neither accounts for savings and investments that will continue during retirement, another shortcoming of most calculators. Both calculators generate charts that list your projected income and sources, gains on investments, annual beginning and end balances, how much you'll have to withdraw and what year you will need to start. If any of you have used retirement calculators that you feel are very good, please share the link(s) with us.