Day 295 - Retirement Calculator Comparisons
How much should I save for retirement? I would bet the farm that this is a very common question. I've been seriously thinking about upping my retirement contribution once we finish paying off the $60K Project, but figuring out an estimate of how much money I will need at retirement is proving more difficult than I expected. How much money will I need for expenses during retirement? More or less than when I was working? I guess it depends on what I intend to do in my golden years - maybe skydiving as the couple in the photo appears to be doing (although I'm beginning to wonder. I'll leave the conclusion up to your own devices).
I decided to Google "retirement calculator" and see what types of options are out there to help me with this task. But how do I know how reliable an online retirement calculator can be? Considering there are so many variables that go into the calculation, I'm not really even sure what I should consider a "good" calculator.
So I decided to do a test - put the exact same information into multiple online retirement calculators and see how similar (or different) the results are. I am
hoping that somehow comparing the results of multiple calculators will help me assess which ones are actually good enough to rely on when it comes to figuring out how much I need to be saving for retirement. Note that the inputs I use are as close as possible to my (including Mike) real life financial situation but some amounts I decided on are completely arbitrary. I also tried to be relatively conservative with returns in an attempt not to overestimate. And what the heck, why not retire at age 60.
In order to be consistent, I attempted to use the following inputs in all of the calculators:
Retirement Age. 60
Life span. 85 years
Current retirement savings: $95,000 401(k), $5,000 Roth IRA
Annual 401(k) contribution (today's $$$): $20,000
Annual Roth contribution: 5,000
Annual inflation: 3%
Average annual raise: 4%
Average annual investment return: 7%
Include Social Security benefits? Yes Benefits starting at age 65
I tested five different calculators which produced the following results. The columns below show 1) the company that offers the calculator, 2) total amount of money saved at age 60, 3) total amount of money required to retire without a shortfall, and 4) shortfall or overage.
Category: Personal Finance