| irement calculator is one of the most useful things | | | | calculator. |
| you can use when planning your retirement savings. | | | | 4. At what rate will your retirement plan grow? A |
| You see most people plan for retirement without any | | | | difficult one this. Five years ago, people were talking |
| idea of how much they need to save, or how much | | | | in terms of 10%, but not now experts suggest a |
| they want in retirement. A retirement calculator | | | | lower figure. The problem is that a retirement fund or |
| provides the answers. | | | | retirement plan has to be prudent – you |
| A retirement calculator shows you how much to | | | | don’t want to wake up one morning, a year |
| need to save to get the income you need when you | | | | or before you retire, to find that a crash on Wall |
| retire. Or it may be how much you want! That | | | | Street has cut the value of your fund by 30%. You |
| depends how much you are making, and how young | | | | just won’t have the time to get that money |
| you are. Either way do use a retirement calculator. | | | | back. |
| You can find a retirement calculator on many web | | | | So you will be doing well to get 10% return, but |
| sites, so you do not need to get the services or a | | | | could almost guarantee 5-6%. Maybe 7-8% would be |
| retirement planner or investment advisor to find the | | | | a realistic figure to put into the retirement calculator. |
| answers. In this way, you use the retirement | | | | The retirement calculator is just some software set |
| calculator, calculate the amounts you need, and then | | | | up to make a calculation after you enter some |
| visit an investment advisor or retirement planner. | | | | figures. As I said earlier, the retirement calculator |
| To decide how much you need to save, you need: | | | | needs: |
| 1. The income you need to live on at today’s | | | | Required income |
| prices | | | | Inflation |
| 2. The rate of inflation per annum between now and | | | | Expected return |
| the retirement date. | | | | And of course, how long till you retire. |
| 3. The rate at which your fund will grow. | | | | Here are some results from a retirement calculator: |
| Let’s go through these and how they relate | | | | Required income: $30,000 per annum |
| to a retirement calculator. First, how much do you | | | | Years till retirement: 15 years |
| need to live on? Remember, that retired people do | | | | Annual inflation: 2.5% (unrealistic) |
| not normally spend as much as people who work. | | | | Annual yield: 5% |
| When you retire, you won’t need:special | | | | Income needed in 15 years: $43,448 |
| clothes for work the sort of car that keeps you up | | | | Required value of retirement plan in 15 years: |
| with the Jonesesyou will be able to take holidays at | | | | $825,000 |
| off-peak timesand you will have time to do things | | | | Quite a lot of money for a modest retirement |
| – instead of paying to get them done. | | | | income. Here’s another one: |
| So your costs will be lower. So let’s say you | | | | Required income: $30,000 per annum |
| are earning $60,000 a year now, you might think that | | | | Years till retirement: 20 years |
| $50,000 would be enough. Next you need to | | | | Annual inflation: 5% |
| remember that if you are healthy, you expect to live | | | | Annual yield: 8% |
| for 15-20 years, and so need to allow for inflation in | | | | Required value of retirement plan in 20 years: |
| that period – so actually you need more! This | | | | $987,573 |
| is where a good retirement calculator comes in. | | | | If you want an income of $45,000 when you retire |
| 2. The next thing the retirement calculator needs is | | | | – equivalent to less than $30,000 today |
| the rate of inflation, or what you expect it to | | | | – you will need: $148,000. |
| average until you retire. With the price of oil going up, | | | | When you use a retirement calculator, make sure |
| we know that inflation over the next decade will be | | | | you use one that does calculate the income you will |
| higher than it is now. Official figures put inflation at | | | | get at retirement adjusted for inflation – over |
| around 2-3%, but the true figure is more like 5%. | | | | 20 years, you will need 50% more than think you |
| This means that you need to allow for at least 5%, | | | | need today. If you do this, then you will benefit form |
| and probably 7% and feed that into the retirement | | | | using a retirement calculator. |