Download - Planning for Retirement Using Online Calculators Presented by Danielle Walker and Dr. Jean Lown 1
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
2
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!
3
What is the Ballpark E$timate?
• An easy-to-use two-page worksheet
• Helps you quickly identify approximately how much you need to invest for a comfortable retirement.
5
How to use the Ballpark E$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.
6
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?
7
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
8
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
9
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
10
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)
11
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!– $200,000 for a couple aged 65
12
Ballpark E$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
14
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
15
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
16
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
18
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
19
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
21
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
22
TROWE Price
• Website– http://www.troweprice.com/common/
indexHtml3/0,0,htmlid=902,00.html?scn=T._Rowe_Price_Calcul&rfpgid=8278
23
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
24
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
25
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/
27
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
28
Planning for a Secure Retirement
• On-line course to help you plan your retirement
– http://www.ces.purdue.edu/retirement/
29