Does it sometimes seem like certain people have a gift for retirement planning? Do you ever wonder whether they possess otherworldly--dare we say, magical--powers for determining what to expect? Well, there’s a secret to the trick. It’s called a retirement calculator; while not entirely a crystal ball, it is one of the tools that helps you to plan for what you need over your retirement years. To give you a boost, the calculator supplies some key defaults based on best practices, averages and conservative estimates designed to help you define your future. Feel free to go with these to get a baseline, or simply adjust as you see fit.
Point is, it’s all about you. Here are the five key elements to address:
1. Personal Information
Are you married? The calculator defaults to “no” in the spouse category (which will enable you to move through the calculator a bit more quickly), but feel free to click on yes to best represent your life situation. Next fill in your age and income. Easy. Retirement age, the following parameter, may seem pretty straightforward, but there are some hidden variables, based on your birth year and month. To keep it simple and make sure you get your full social security benefit, the default is set 67.
As far as life expectancy, the calculator supplies a default of 98. Few of us live to 98, and you could also go with the average lifespan of Americans, which is just under 79 years, but remember you want to err for a longer period in retirement. Why? You don’t want to be caught short with another two decades to live, and you can always give your excess away as inheritance or charity. As for living expenses, the calculator conveniently estimates the monthly living expenses you might need, based on averages, over the course of a 31 year retirement.
3. Benefits & Pensions
The benefits and pensions section defaults to the previously mentioned full retirement age of 67 and estimates your social security benefits automatically. If you happen to have a pension, you can enter it here, and adjust the amount, years and inflation expectations accordingly.
4. Tax-Advantaged Savings
The tax-advantaged savings window breaks out your retirement savings across various 401(k), IRA, SEP and other retirement accounts with inputs for current balance, rate of return and monthly contribution amounts. You can go as deep as you need and see fit here.
5. Other Savings
This section is dedicated for your taxable accounts--typically brokerage and banking--and any planning for future investments. As with the tax-advantaged savings section above, balances, rates of return and contribution amounts are factored in. Pretty straight forward.
So that’s it! Go ahead and give it a shot by opening the calculator here. And remember, it’s not about getting it perfect, it’s about getting a picture of what to expect so you will be able to prepare confidently.
This material is intended for general public use. By providing this material, Guardian/Park Avenue Securities is not undertaking to provide investment advice for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a tax, legal, or financial professional for guidance and information specific to your individual situation.
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