While some of the more complicated calculators will make sure to include other sources of retirement income such as social security and pensions, after viewing a more complex calculator, I have come to the conclusion that there are so many very important things to consider if you choose to try one of the many retirement calculators out there:
1. Save ten percent of your gross income—If you automatically set aside ten percent of your income for contributions to savings accounts, 401K’s and IRA’s, then you don’t have any real math to figure out. It’s also easier to not miss the money when you cannot spend it in another area from the beginning. When your place of employment matches a certain percent on their 401K, always contribute the maximum amount to receive those pre-tax benefits of free money.
2. Research the best savings accounts—Shop around for the best rates from banks to community credit unions whether it be a money market and/or traditional savings account. Always be careful of hidden maintenance fees or other fees that can take a bit out of finding the most competitive interest rate.
3. Invest in a Roth IRA. Since the current contribution limit for a Roth IRA is about 6,000 dollars, it makes the most sense to contribute here after 401K and before standard savings accounts.
4. Forget about the idea of Social Security—I tend to error on the side of caution and try think in terms of retirement savings like you are not ever going to see social security. If a retirement calculator includes a section on social security, leave it blank. If you can afford to save 12-15% of your gross income, figure out a way to do so.
5. Skip the financial adviser unless you know them—By all means, unless you have a close relationship with a friend or no have connections with a financial adviser, it just might pay to invest that money into your savings and rely on your own planning.
From the simple to the complex, a good retirement calculator allows you to become your own best financial adviser, when you still have adequate time to make smart investments. A good retirement calculator will break down your financial outlook and give you a streamlined view of–at least–your current principal, yearly contribution, years to grow, and growth rate.