You are nearing the age to begin serious considerations for your retirement and estate planning. But are there tools available to help you work through some of the numbers? Yes.
The web is full of free tools and 401(K) or retirement calculators that promise to help you plan for your retirement and sort out your long-term investment needs.
However, each of these tools use different calculation strategies and different assumptions, meaning they all give you varying advice.
To compare the numerous 401(K) calculators out there, we inserted the same numbers, including savings rate, life expectancy and income into three various online and free calculators.
To do so, we inserted the same data about a pretend test subject - a 45-year old man with no spouse or dependents and an annual income of approximately $50,000.
Our subject had a minimal mortgage balance, a savings rate of about 10% and approximately $90,000 saved in a 401(K). He wanted to retire by the time he was 65, live on $50,000 (100% of his pre-retirement income) and he expected to live until the age of 100.
Keep reading to find out what each 401(K) calculator recommended and how they measured up.
Calculator: Ballpark Estimate (URL: choosetosave.org/ballpark)
Ballpark recommended that our test subject needed to save just over 55% of his annual income to retire in 20 years with an annual retirement income of $50,000 per year. Changing the retirement age to 70 and even 75 lowered that rate significantly.
In terms of quality and experience, the site took a little over 9 minutes to complete the questionnaire and calculate the final results. Overall, it was easy to use and lets you include extra income sources like a part-time job or investment returns. The one major drawback is that you can’t fiddle with the numbers or make major adjustments without starting over from the beginning.
The Nationwide’s Retirability Calculator (Online at: nationwide.com/nw/nrri/index.htm?wtgo=retirability)
Nationwide’s retirement calculator tool actually gives you a score based on your readiness for retirement. Our test subject scored 88, a poor ranking when 100 and up should be your overall goal.
The site took just under 8 minutes to input our information and come up with its results. One major feature of Nationwide’s 401(K) tool is that it includes home equity as part of your assets. Considering that most Americans wind up tapping into that equity, it’s more accurate.
Calculator: AARP (URL: aarp.org/money/financial_planning/sessionseven/retirement_planning_calculator.html)
At the moment, our test subject is saving just over $400 in his retirement savings. According to the AARP calculator, that amount needs to increase to $1600 in order to meet his goal of full retirement at 65.
The 401(K) calculator took about 10 minutes to use. Though not as flashy as the other tools on this list, it provided clear and easy-to-understand results that were complimented by a graph and easily editable variables.
