Some retirement income calculator websites are much too simple to be used for serious retirement planning. They only take a few variables into account and leave too much to chance.
Some of them give you a large number as your target savings amount, but they don't tell you what should or should not be counted to get there.
As we recently learned the hard way, there will be times when the markets are down and our portfolios may not get the returns we estimated.
The only way to guard against that is to make sure we save enough.
On the other hand, we shouldn't just choose a large number at random and work hard until we get there.
What if we work much longer than was necessary, possibly in a job that is so stressful that it affects our health over those last few years before we can enjoy our free time?
I certainly don't want to do that!
We need to plan carefully to decide how much money for retirement is the right amount.
Everyone has different needs once they retire. The money we save will provide income for life after we retire.
Some people live simple basic lives without a lot of unnecessary expenses. Others may have grand travel plans or a desire to leave a legacy for their children. A calculator isn't going to see this lifestyle difference based on salary or income alone.
Simple but good Retirement Calculator Spreadsheets
Firecalc is an excellent tool for analyzing your savings goals because it applies your numbers against hundreds of scenarios. Will your savings last if there is a downturn in 5 years? What about in 2 years?
This retirement income calculator evaluates you savings plan and returns a probability of success for your desired income and portfolio size.
As I said before, however, you need to know how much income will support your desired lifestyle. So before you can use this or any other calculator, you must first understand what your retiree needs will be, by doing detailed budget and lifestyle planning. Go here for more info on using financial calculators.
A retirement income calculator won't help if you haven't determined your retirement budget (see menu items for Financial Planning.) Otherwise you will only be guessing.
There is also an example of finding your income needs here.
Another pretty good retirement planning tool is the retirement income calculator at MSN Money. This one takes Social Security benefits into account.
It also allows you to specify whatever % of your current income YOU think you will need, rather than only offering a few high percentage options. This is important for high earners who already live well within their means and plan to do so after retirement, as well.
This calculator bases income need on current gross income, with the lowest percentage for retirement being 80%.
Suppose your current income is funding college for kids, and maybe an investment account along with a mortgage that will be paid off by retirement age?
Since these expenses won’t be needed after you retire, using the % of income seems to be unreasonably high.
A better approach would be to estimate ACTUAL expenses.
You can consult a fee-only financial planner who has powerful calculators to simulate real world market scenarios against your particular situation. This is the ideal retirement income calculator to use, and I highly recommend it!