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Florida Business Park
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Minneapolis Financial Planner Hi, Vince Oldre here again. I want to talk to you about the five reasons why retirement calculators can fail for most baby boomers. Number one is that it's too simple. A lot of these retirement calculators that you can use online, they make too many assumptions. A lot of them use fixed rate of returns, and if you were around, which I assume you were, in 2001 and 2008, you would know that the market doesn't just go at a fixed rate of return at 8%. There are going to be bumps and hills along the way. That's why when you use too simple of a calculator, it may give you a false sense of security. Make sure when you're using a retirement calculator it's not going to be too simple. Minneapolis Financial Planner That's why you need to also point to other factors, like social security. The reason why a lot of these other retirement calculators do not work is because they don't actually look at your overall plan.
I'm not just talking about the free ones you can use with your 401(k) plans, but the ones that even that some financial advisors use aren't going to look at everything like social security. The benefit with some of these financial retirement calculators is they will actually put your social security calculations in with your overall retirement plan. If you are going to be using one, make sure that you use one that's going to have that social security ability to plug into your overall retirement plan. Minneapolis Financial Planner The third reason why they're not always the best or why it could fail is because of inflation.
We have to make assumptions on inflation when we're using the retirement calculators, but some calculators don't even have inflation adjusted numbers. You have to be careful with inflation and make sure that if you are using a retirement calculator and it's going to tell you what your income is that point in time, keep in mind as you go along in retirement you might not have inflation adjusted numbers. You want to make sure that your social security, your retirement calculator's not too simple, and you want to make sure that inflation's added into it. The other factor that we look at is, our taxes. Now taxes, I believe, are huge. If you want the most you can get out of your retirement, we need to take it out tax efficiently. A lot of retirement calculators don't talk about taxes because they don't look at the overall plan, they're just looking at just your investments. What we want to do is make sure that when we have the retirement calculator it's going to take all those things into consideration, but also add in taxes.
What is your bottom line going to be when you receive your income? What's the bottom line going to be when you leave it to your beneficiaries? Minneapolis Financial Planner Last but not least, the reason why I believe these retirement calculators that are free or that are too simple online is that they don't come up with the unexpected occurrences, like a major market correction or a loss of a spouse where we might lose a social security check or even a pension. Maybe we have a long term care event, and we're going to spend down a lot of our assets because we have to help take care of our significant other. A lot of these things never get factored in the retirement calculator, but when you do your own retirement plan, when you write it all down, you need to make sure you have steps covered for each one of these scenarios.
Minneapolis Financial Planner When you work with a retirement calculator make sure that it's not too simple, it's going to cover your social security, it will have inflation adjustments, it will cover taxes, and it can look at the unexpected occurrences. That in a nutshell will give you a good retirement calculator. From experience, I've never found one that works perfectly. That's why usually it works well to partner up with a financial adviser that does utilize a really good retirement calculator to make sure it's going to work with your own retirement plan. Until next time, we'll see you then. {Minneapolis Financial Planner}.