How To Use A Retirement Income Planning Calculator
March 8, 2008
A retirement income planning calculator is a program you can find for free on the internet that will help you decide on how you should go about saving for your retirement. In order to really benefit from what a retirement income planning calculator can tell you it is a good idea to discuss the results with a financial expert, but if you understand the information you are asked to put into a retirement income planning calculator then maybe you can understand the results a little better.
The Results
When talking about a retirement income planning calculator it is best to understand what results you will be given when you click on the “calculate” button. A retirement income planning calculator is designed to take the money you make now, take an inflation percentage that you give it, and then tell you how much money you will need to have in future dollars to live the lifestyle you have now in current dollars.
In other words it will take what you make now and tell you how much you need to save per year to enjoy the same lifestyle when you retire that you enjoy now. It is purely speculation but they use a whole bunch of mathematical formulas that have been developed over years of study. The accuracy of a retirement income planning calculator is always in question.
Inflation Percentage
Inflation percentage is the rate at which the price of things go up over time. For many years it was safe to use a number like 4% or 5% for annual price increases and increases in the cost of living but with the price of gasoline skyrocketing, and the uncertain future of the economy due to the potential loss of fossil fuels in our lifetime, inflation becomes a difficult number to pin down. Lately a number to use is 8% but as the world inches closer to the possibility of a world without oil that number could skyrocket.
Today’s Dollars
A retirement income planning calculator will give you results in what it refers to as today’s dollars. If you make $3,000 a month now then the retirement calculator will tell you how much you need to save to enjoy a $3,000 a month lifestyle equivalent when you retire. Due to inflation that actual number will obviously be higher in the future but when you are using a retirement income planning calculator it gives you everything in terms you can understand and those terms are today’s dollars.
Tags: retirement planning, retirement income planning calculator
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