Choose your Retirement Income Planner
There are so many variables in retirement planning that you need a comprehensive guide or retirement income planner to help you along.
A retirement income planner is more than a mere retirement income calculator. It takes you through a much more thorough and broader analysis of your particular situation.
I investigated several retirement planners. Most of these planners are nothing more than retirement income calculators. The best retirement planner I found is very much focusing on the retirement planning environment of the United States of America. With a bit of imagination you could apply it to the environment of other countries.
A much simpler, and more generic, income planner can be found at CNNMoney.com. Let's review that one first and investigate the basic issues.
Tip: If you click on the hyperlink, the
page will open in a separate window. Switch between windows to use the
planner and to read the comments below on this page.
Please
take note that these retirement income planners are mere tools and for
educational purposes only. You cannot rely on it for your retirement
planning decisions. You'll need a qualified advisor for that.
On the first page you enter your current situation. Quite straight forward. Enter you and your spouses current age and annual income. The 'Desired Annual Income in retirement' is a bit tricky, but go with 70% for the moment. Click 'next' to go to the Income page.
If the social security expected benefits do not apply to you, enter zeroes and click on 'Add Fields' to enter other expected income from pensions and/or annuities. You'll have to contact your various fund managers to establish the exact amounts and detail.
On the next page you enter detail around your savings accounts. Tax rates usually apply to other retirement income accounts.
Now you need to select a portfolio that resembles the mix of your existing retirement accounts.
When you click on 'next' you get to the results page. To see details, click on 'Show cashflow'. To improve your plan, click on 'Adjust'.
You can go back to any of the pages to adjust values.
Please note that this planner doesn't take possible future liquidation of assets into account.
The best online retirement income planner I could find is from Fidelity Investments. You've got to register to use this planner. If you are a Fidelity account holder you can come back later and login to access your planner. If you're not an account holder, like me, you get only one shot at it!
On the first page you enter some personal information. Do read the sidebars. It contains invaluable information.
On the next page you enter your estimates for living expenses. There is a Retirement Budget Worksheet available for a more accurate estimate.
The next page is about your most recent income. You can also add some expected pension and annuity income. Get details on your Social Security, pension, and/or annuity before you access this planner.
Under 'Other Income' you can add amounts like lump sums and/or future asset liquidation.
The next page gives you an income and expense review. Take note of their assumptions and look at their methodology to understand how the calculations are made.
Now you get a chance to enter detail of your other accounts and assets, and on the next page to asses your investment risk tolerance.
Go to a summary of your key information. Run the simulations. To calculate how long your money may last, they run at least 250 historical market simulations!
You get a detailed analysis of your plan with risk assessment. Some what-if options to consider are available. You can really model various options online and see the effect on your plan.
This is the most important page of this retirement income planner. My opinion is that you can get a fairly accurate picture of your plan. Your input must obviously be as accurate as possible. Go back and forth until you have tweaked it as accurately as you can.
Next you get an analysis of your asset allocation, and an analysis of your sources of income for your first year of retirement.
The last page is Fidelity's action plan for you with an option to invite Fidelity's consultants to contact you. Here you can also download your full plan report in PDF format. The report is understandably a sales pitch for Fidelity, but the Appendix contains a detailed income plan analysis.
Please keep in mind that this retirement income planner is still merely a tool. You cannot rely on it for your retirement planning decisions. You'll need a qualified advisor for that.
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