What Is A Retirement Calculator And How Do I Use One?

A retirement calculator is meant to be used well before a person retires. There are many such calculators online and they are not all the same. Some will help a person to see how much money is still needed to reach his or her retirement goals. Others help a person to see how much money his or her investments will have accrued by the time retirement age hits. What can be said for most all calculators is that they are free and can help a person make sound plans for retirement.


What Formula is Followed?

All calculators for retirement follow the same basic formula in that they ask a person to provide information relevant to his or her situation. The figures provided by the calculator are based solely on the information that the person has provided. Some of the information requested, however, can only be guessed. Things such as one’s life expectancy and expected returns on investments cannot be predicted with full accuracy. It is important to realize that the calculators are not government regulated, although they do take government regulations regarding taxes and retirement age into account.


How to Choose the Right Retirement Calculator

As retirement calculators are different, they follow different formulas. First of all, a person should make sure the calculator or formula being used is relevant to his or her country, as calculators on retirement can be found on American, Canadian, British, Australian and other websites. A calculator on a foreign website will not be relevant to a person who is living in a different country.

A number of financial institutions such as CIBC, HSBC and Bank of America provide calculators on retirement that can be used by customers and non-customers alike. The AARP also provides its own calculator format on its website. Other respectable sites that have these calculators include Kiplinger.com and cgi.money.cnn.com.

Depending on the nature of the calculator, some may ask for information that others do not require. A person may want to try out several calculators in order to get a comprehensive idea of what retirement would look like if certain factors were or were not in place.

Likewise, it may be a good idea to provide different estimated regarding expected life span and investment returns, as this can help one to see how much money will be needed if certain factors were or were not part of the equation.

A person who is planning for retirement will probably find a retirement calculator to be very useful. Such a calculator can help one to estimate how much money will be needed for retirement as well as how much one can expect to earn from present savings accounts and investments.

However, it should be remembered that these calculators base their figures solely on the input provided by the user. They are not fully accurate, as no user can predict future events such as life expectancy or the inflation rate decades from now. A person should keep this in mind and be sure not to base his or her retirement plans solely on the figures provided by a calculator.


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