Retirement Planning Made Simple
A recent
Bank of America
(BAC) - Get Report
survey found that 30% of Americans think that planning for retirement is difficult to start -- almost as many as those who find it difficult to start a fitness routine (29%) or a diet (28%).
Many folks find retirement planning daunting because it requires them to answer questions whose answers aren't immediately obvious. The Bank of America survey also found that 40% of respondents are concerned about figuring out how much they need to save, while 33% aren't sure when they can afford to retire.
Fortunately, you can easily answer questions like those by using the online
Retirement Planning Calculator
at BankingMyWay.com.
The worksheet calculates how long your retirement savings are likely to last -- based on information about factors such as your age, your current savings, when you plan to retire and how much you hope to draw from your retirement savings. If it turns out that your money will run out too soon, you can experiment with different numbers. For example, the worksheet will tell you how much longer your money will last if you boost your savings rate from 6% to 9% of your income or if you postpone retirement for two years.
Bear in mind that changing the numbers you enter in the worksheet will make major differences in the outcome. Thus, it's important to make realistic assumptions about things such as the expected returns on your investment before and during retirement as well as the expected rate of inflation.
With that in mind, it's probably a good idea to try out a variety of reasonable scenarios. For example, see how changing the expected rate of return on your investments from 7% to 9% will change your retirement outlook. Or consider how much faster your money runs out when you boost the rate of inflation from 3% to 4%.
One bit of good news: If you are falling short of your goals, modest changes can make all the difference. For example, saving a little bit more and postponing retirement by a year or two could yield surprising financial benefits. Use the calculator to try out different strategies and see which ones make the biggest difference for you.
Once you've done several scenarios, you'll have a reasonable bead on what you might need to do to meet your retirement goals. But it's a good idea to revisit this calculator at least once a year to see how your assumptions are holding up -- and whether you need to make changes.
Once you get rolling, you'll find that kicking around various retirement scenarios can actually be fun. At any rate, it's easier than choosing among the 25 latest fad diets.
Peter McDougall is a free-lance writer in Freeport, Me.