When it comes to retirement, there is no magic number that someone needs to have in the bank in order to live out one’s golden years. Retirement finances are complicated to prepare for. As you plan for your retirement, a number of factors can come into play. These factors will play a big role in determining your financial goals and ensuring that you have the funds available for your situation.
There are a number of retirement calculators available online. But, a simple retirement calculator will not give you enough information to make the right choices. Instead, you should look for retirement calculators or financial planning software that allow you to calculate for different scenarios that you may encounter when you retire. Some of the scenarios to explore when using a retirement calculator include:
Length of Life
Life is unpredictable, which is why it is hard to determine how much money you will need for retirement. Some people retire at age 65 and may, unfortunately, pass away within a few years. But for others, they may live for more than 20 years after retiring. When using a retirement calculator, it is in your best interest to do different calculations to determine how much money you will need when factoring in different lengths of life.
Since there is no way to predict how long you will live. It is best to make plans to have the financial means to support a long life. In 2019, there were almost 13 million people in the U.S. over the age of 80. That figure is expected to grow in the future. In the event that you live past 80. You want to make sure that you have the funds needed to live comfortably.
Expenses During Retirement
A comprehensive retirement calculator will allow you to compute the amount of money that you will need to cover all your expenses after retirement. Regular expenses will vary from one person to another. For example, some people own their homes at the time of retirement, while others may still have a mortgage.
Your life may change between now and when you retire. But a good retirement calculator can give you a good idea of how much money you will need to cover your bills. You can also use a retirement calculator to help you save money for things that you hope to do after retiring, such as travel, while still ensuring that your main expenses are covered.
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Age of Retirement
Deciding what age to retire is something that can be quite tricky. Retiring at 62 may work for one person, while someone else may be in a better position to retire when he or she is 65 or 67. When using a retirement calculator, take the time to look at what your financial position will be depending on what age you retire. You may find that working an extra year or two can put you in a much better financial place. It is also possible that you may be able to retire earlier than you thought possible.
Inheritance Goals
While planning for retirement, the main goal is to ensure that your financial needs are met. But it is not uncommon for people to have a desire to leave behind an inheritance for their children and grandchildren. If you want to bless your family with a financial windfall after you pass away. A retirement calculator can help you determine how much you need to invest and save now. Then, you will have money to pass on to your loved ones.
Which Calculators To Use
If you want a very quick and simple view of your retirement projections, you can start with something like Vanguard’s Nest Egg Calcuator. It is a simplified retirement calculator and doesn’t allow much flexibility for taxes, investment rates of return, and retirement income. But it is a good place to start before moving on to a much more sophisticated retirement calculator with financial planning software.
A more detailed and accurate retirement tool that many individuals now use is called WealthTrace. This retirement program/calculator or financial planning software allows ultimate flexibility with investment returns, tax rates, investment account types, investment contributions, life expectancies, pension payments. And even Roth IRA conversions. You can feel much more comfortable with the retirement projections using a program like this as opposed to more simplified calculators.
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Conclusion
Planning for retirement can be quite complicated. The last thing that anyone wants is to be near retirement age and not be prepared. Utilizing a comprehensive retirement calculator available online can make a big difference in planning your saving and investment strategies. You can also sleep better at night knowing what your projections are. And if you have enough retirement income and investment principal to meet all of your retirement goals. You can even figure out if it makes sense to move to a different state that has lower costs of living and/or lower income tax rates once you retire.
Considering different scenarios can give you a clearer picture of where you need to be financially by the time you retire. Having a financial goal for retirement and knowing what you need can bring about peace of mind and set you on the right path for your financial future.
