Retirement planning calculators are just one tool for you to use as you climb the ladder to your successful retirement.
Many calculators on the internet are simplistic and inadequate. So firstly you need to find a calculator that works for you and then you can use this in your regular annual plan review.
Understand that these retirement planning calculators are not always best used at the beginning but may be more useful at the end of your retirement planning process.
What's the point of knowing what you'll have when you don't know what you want?
Merely plugging numbers into a simple calculator can be a very dangerous basis on which to decide your retirement. As included in the calculations are a number of variables which you must carefully think through.
The world is a fast changing and volatile place and there are often unexpected changes that can have a significant effect on your calculations. One simple problem you have every year is … the longer you live the longer you're expected to live!
If you accept my concept that you are retired at the point you decide that you will have enough money to live your chosen lifestyle till the end of your life, then a useful place to start your retirement plan is by using a life expectancy calculator.
The best one that I've found is Living to 100. Don't be too startled when you get the results … my own life expectancy is 98!
Initially when selecting a calculator ensure that it is applicable to your country and financial circumstances.
The spin from web sites and software publishers eager to tap the financial anxieties of retirees, is that if you can stuff a few numbers into a calculator you can develop your retirement plan. That's unfortunately incorrect.
They have no clue on projecting risks or unexpected events also known as "black swans" that can have a major impact on your life, or handling tricky tax and pension problems.
Never forget the old computer adage of … garbage in, garbage out. So use calculators with care and make sure you understand the result they give you.
No computer model can deliver complete peace of mind about your retirement. How can it be possible for an event that is going to take place for anything up to 40 years when we don't even know what will happen tomorrow?
Retirement planning is a complex and ongoing process requiring regular review and specialist support. Financial advisers will provide guidance with certain aspects of your plan but they are not retirement planners. Consider their advice and input with extreme care.
The web can get your thinking started. However, as with many subjects on the web, it is easy to become overwhelmed by the many links and the many that seem to lead to nowhere. You'll can find simple calculators at sites like FinanCenter and InvestorGuide.
In an attempt to treat uncertainty and to optimize investment calculations companies like Financial Engines use advanced mathematical algorithms to help optimize your retirement investment plans.
The company was started by an economic science Nobel Laureate William F. Sharpe to provide help to individuals. They offer either professional management services or online advice which gives you access to its expert recommendations and tools.
Whilst every method is fallible their systems are designed to help you to avoid exposure to the worst possible damage.
When working with these calculators you will be asked for your opinion of factors such as inflation rates, returns on investments, how long you expect to live, what you expect your social benefits to be and how much you need to retire. Be aware that small errors can have severe consequences.
So while there is a large range of retirement planning calculators, tools, and techniques available to help you figure out your retirement needs, never forget ... they will never replace your judgement and wisdom.
Retirement Financial Planning: Start working on your financial plan today