Retirement Income Calculators

Reviewed: November 07, 2014
By FinanceWeb

retirement income calculator is a system for finding how much money will be available during retirement. Usually based on a monthly budget, it summarizes income assets including social security. Persons about to retire can use these systems to determine the level of monthly spending and a sound budget for retirement years. Persons who are not near retirement are the ideal group to use retirement income calculators. These questions and answers can guide a path to retirement security by establishing a program of savings and developing important assets.

A Planning Tool

A retirement plan begins at the start of working or a career. One either uses the opportunities to begin building future security or not. Each decision represents an opportunity taken or lost. For most people, the elements of a retirement include some basic things such as savings, investments, retirement programs, and social security. People who own or operate businesses can add business-related equity as an asset. For everyone, a retirement calculator puts the elements of a retirement plan into a clear picture. One accumulates assets over time and upon retirement these assets provide income for a comfortable life. Many planners, mutual funds, and financial investment firms offer free retirement calculators. While they in some way may point to services provided by the host, the calculator reveals data and planning elements that will apply to any situation.

The Role of Savings and Investment

Savings and investments have a singular goal, to help money grow. Interest and compounding are important tools for creating wealth and a comfortable retirement, they do not require additional effort. Compounding is a form of passive income. Compounding is the high-water mark for growth. It occurs when interest income remains in an investment or interest bearing situation and draws additional interest. Compounding accelerates growth, and those that begin retirement savings early in career or employment take maximum advantage of compounding.

The Elements of a Retirement Plan

Savings are a firm foundation for retirement. A 401(k) or Roth I.R.A. are typical vehicles that permit tax deferred savings over a lifetime. The government defers taxation on any untaxed principal amounts and earnings until withdrawal or distribution. These individual retirement savings accounts are an important element for retirement planning. Investments are another proven method for growing assets for retirement. Some investments have little or no risk such as U.S. Treasury Bonds. Other investments have a greater risk but may still be quite rewarding such as stocks from large capitalization issuers. Many investors choose to account for the risk by restricting the amount of investment and spreading it across a wide range of investment instruments. A balanced portfolio might include no risk bonds, no-load mutual funds with strong performance, and stocks with long histories of paying regular dividends.

Using a Retirement Calculator

The data entered into the calculator will provide a result that suggest the amount of money that will be available for retirement. By running the calculator frequently, one can make adjustments to find a track to successful retirement, and stay on track. Some elements will require changes due to changed conditions. For example, a savings rate may have to increase if interest rates drop. Calculators are not intended to replace professional advice nor individual efforts to research and find ways to a secure retirement. There are other important aspects such as insurance which will help protect assets.