I recently ran into a post that highlights the three best retirement calculators. It does a great job of detailing what the author considers to be the best options, including strengths and weaknesses, and summarizing the situation as follows:
Free retirement calculators are plentiful on the web. These are three of the best, in my opinion. Try them. Try more than one. But use them all with caution!
Understand that retirement calculators aren’t giving you the answer to a simple mathematical equation. They are actually attempting to model the future. That’s a tough assignment. One that is actually impossible, in any precise sense.
I don’t recommend relying on any of these tools, and then resting on your laurels. Consult them, at least annually, to optimize your near-term financial decision making, while understanding that the future will inevitably turn out different than planned.
Lots of thoughts on this one. Here goes:
- I have heard of two of the three options he highlights, so I guess I'm fairly in the know. :)
- One of the options is from Vanguard, a company I use and trust. It's a very easy calculator to use. I plugged in 40 years, $1.7 million, $50,000 spent each year, and a stock/bond/cash mix of 20%-50%-30% and it gave me a 96% probability that my portfolio lasts 40 years. Given that I could easily live off $50k plus what my rental units generate, I guess I'm ready to retire now!!! :)
- The second is from Todd Tresidder who wrote the best book I've read on retirement titled How Much Money Do I Need to Retire?. It's a bit more complicated, but worth the time. I went through it a year or so ago in updating my own retirement plan.
- I don't know much about the third option, but I am going to check it out. It looks like a more complicated version of what Vanguard offers, but that's just my first impression.
- Two key points of the article are 1) there's no perfect calculator as you're trying to predict too many future variables, and nothing can do that and 2) any calculator should be used simply as a guide and combined with your own judgment, experience, personal life preferences, and so forth. Couldn't agree more.
- The fact that these are the three best FREE retirement calculators begs the questions, "Is there a better calculator than these that you can pay for?"
Anyone have anything else to add? Have you used a retirement calculator recently? If so, what did you think of it?