Retirement calculators are an invaluable tool to work out exactly when you can retire from full time work. You just need to input some details into the retirement calculator and it will come back with data to assist you in planning your retirement.
You will be asked to enter some information about your situation. The details include:
- Birth year
- Tax bracket
- Retirement age
- Life expectancy
- Current salary
- Desired retirement income
- Amount for heirs
Your year of birth is required so the calculator can work out when you will retire. It wants to know your tax bracket so it can calculate how much tax you will pay on future income and what benefits you may be entitled to. You can input your retirement age if you know this, otherwise make a guess. The calculator must know your current salary in order to figure out how much money you will have when you retire. If you don’t earn enough to retire on then you may need to work for longer, even up to age 70.
The calculator needs to know your desired retirement income so that it knows how much you can live on in your current lifestyle patterns. It is important to work out how much you need to live for 20 or more years without working. Also keep in mind inflation which makes the cost of living rise each year. Then amount for heirs question is about how much money you want to set aside for beneficiaries. Think about who your beneficiaries are and how much or what they will receive. It is vital to have this planned in advance.
You will also need to answer questions about any investments you have. They will want to know the growth rate of your investments in total. You can get this information from your financial institution if you are unsure.
Use a free online retirement calculator
Using a retirement calculator is exciting but can get complicated. Keep in mind that results will never be exact but exist only to give you an indication. There is no need to see a financial advisor before using a retirement calculator, you can save considerable money on fees. You can find free retirement calculators online. You can even try using several calculators to see how the results compare. You can also experiment with different scenarios by changing one or more variables.
If your circumstances, income or investments change, recalculate so the new data is taken into account. Test various options in the calculations such as more income, higher yield investments etc. to see how you could improve your retirement calculator.
Remember to build in a healthy contingency fund into your plan in case circumstances change.
