Planning for Retirement Using Online Calculators

Presented by

Danielle 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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