Planning for Retirement Using Online Calculators

Presented byDanielle Walker and Dr. Jean

Lown

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Objectives• Be able to:

– Use the Ballpark Estimate to figure retirement investing amounts needed

– Explore other online calculators– Explain why you should recalculate

yearly– Explain why different calculators

produce different results

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Online Retirement Calculators• Purpose

– Give an ESTIMATE of what you will need to invest for retirement

– Or see if your current investments will last your retirement

• Don’t forget about Social Security!

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Ballpark E$timate• Website

– http://www.choosetosave.org/ballpark/

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What is the Ballpark E$timate?

• An easy-to-use two-page worksheet

• Helps you quickly identify approximately how much you need to invest for a comfortable retirement.

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How to use the Ballpark E$timate

• Interactive (on-line)• All of the calculations are done

for you• You just enter the numbers• Need to be on-line

• Non-interactive• print the sheets from the web

site• fill in data & do the calculations

on your own.

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Data Needed for the Ballpark E$timate

• Current income• Age & expected longevity

– Planning for a Secure Retirement module 1

– http://www.livingto100.com• Planned retirement age• Percent of income to

replace in retirement• Health care in retirement

• Amount of pension– Contact HR office

• 401(k), IRA balances• Estimated Social

Security benefits– From annual

statement• Other retirement

income– Work? – Rental income?

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Social Security• Annual S.S. statement (via mail)• Full Retirement Age (FRA) no longer

65!– persons born 1943-54: 66 years– 1955-1959: 66 + 2, 4, 6, 8, or 10 months– persons born 1960 & later: 67 years

• 62 is earliest age for SS retirement• Benefits are permanently reduced

for early retirement

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Decisions…• Percent of income to be replaced

– How much of your current annual income will you need in retirement?

• 70% or higher• living on a lot less in retirement isn’t what

most people want• Health & long term care costs are the BIG

unknown

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More Decisions…• How long are you likely to live?

– Based on family history and health how long do you expect to live?

– Web-based longevity calculators• Planning for a Secure Retirement

http://www.ces.purdue.edu/retirement/• http://www.livingto100.com

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Tips for Couples• Each spouse should fill out own

worksheet– Divide joint assets

• each $ resource can be used only once– If one spouse’s SS benefit is less than 50% of

other spouse’s; increase the lower annual benefit to 50% of higher earning spouse’s

• If John $12,000; Mary $4,000– Increase Mary’s benefit to $6,000 (50% of spouse’s)

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What % of Income? • When determining your goal, you

need to think about the type of retirement lifestyle you would like.– Do you want the cruise-of-the-month

retirement or are you planning to spend your time in the garden?

• Plan on health care (LTC) costing far more than you can imagine!– $200,000 for a couple aged 65

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Planning Jane’s Retirement• http://www.choosetosave.org/ballpark/

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Ballpark E$timate• Note the title: a rough estimate

– Re-calculate each year– Individuals less than 10 years to

retirement need more than an estimate.

• need a comprehensive plan based on their individual situation

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FINRA• Has specific instructions for each

category• ‘Other Income’ category is a little

confusing - supposed to include Social Security

• Makes some assumptions but overall pretty helpful

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Info needed for FINRA• Current Savings

Balance• Annual

Retirement Income

• Annual Yield• Other Income• Inflation Rate• Current Age

• Current Tax Rate• Retirement Age• Retirement Tax

Rate• Withdraw Until

Age• Inflate

Contributions• Are Annual

Contributions Tax Sheltered

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FINRA• Website

– http://apps.finra.org/Investor_Information/Calculators/1/RetirementCalc.aspx

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CNNMoney.com• Very detailed• Can add other fields for even more

accuracy• Can calculate for you and your

spouse at the same time• Results very specific• Results are shown in graph form

and contain the probability you will reach your goals

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Info for CNNMoney.com• Current Age• Desired

Retirement Age• Life Expectancy• Current Income• Typical Annual

Raise• Desired Annual

Income in Retirement

• Expected Benefits

• Age Benefits will begin

• Survivor Benefits• Savings info for

401k, IRA, or other retirement accounts

• Your portfolio volatility

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CNNMoney.com• Website

– http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp

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TRowe Price• Very helpful• Tells how much you will need to

save every month to reach your goal

• Does not include Social Security• Less info than other calculators

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Info for TRowe Price• Current Salary• Tax Rate• Inflation Rate• Number of years

until retirement• Number of years

living in retirement• % of Salary you

want in retirement

• Pretax rate of return in retirement

• Current investments in taxable accounts

• Pretax rate of return on taxable accounts

• Current assets in tax-deferred accounts

• Rate of return on tax-deferred accounts

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TROWE Price• Website

– http://www.troweprice.com/common/indexHtml3/0,0,htmlid=902,00.html?scn=T._Rowe_Price_Calcul&rfpgid=8278

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WellsFargo.com• This is for people who want to see

if what they are doing is going to last their whole retirement

• Very good instructions• Annoying Audio - can be turned

off• Gives suggestions

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Info for WellsFargo.com• First name• Age• Retirement Age• Current Annual

household income

• Current Retirement Savings

• Retirement Savings each month

• Annual income desired in retirement

• Do you own a home?

• Social Security

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WellsFargo.com• Website

– http://www.wellsfargo.retiresecureindex.com/

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More detailed on-line calculators• Monte Carlo simulation estimates a range of

likelihoods of outliving your resources– http://www.moneychimp.com/articles/volatility/

montecarlo.htm• http://www.dinkeytown.net/• Mutual fund companies

– http://www.troweprice.com– http://www.vanguard.com

• Personal finance magazine websites– http://www.kiplinger.com– http://money.cnn.com/magazines/moneymag/

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What if you get conflicting results?

• Conflicting results are expected!– Due to

• different assumptions (inflation, rate of return

• level of detail• Is SS included or not• Longer time to retirement- more

uncertainty– Complete multiple calculators

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Planning for a Secure Retirement

• On-line course to help you plan your retirement– http://www.ces.purdue.edu/

retirement/

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Questions?

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