Retirement Calculators: Worth It? Helpful? Accurate?

There’s a boatload of online retirement calculators available, many are free. Enter “retirement calculator” in Google and it told me that there are 1,820,000 results (in 0.35 seconds). Are they worth it? Are they any good?

And why would anyone want to use one?
At one time, there were no such thing as retirement calculators, and people actually retired anyway. Imagine that!

Retirement calculators are used to determine if one’s savings and income are sufficient to fund one’s retirement. Sounds easy. But it isn’t, really.

Peace of Mind, what’s that?
My goal in first encountering retirement calculators is to calculate my retirement stress level. Namely, if a calculator shows that I have enough money for retirement, I could relax and choose to not worry. (Worry is a choice, after all, isn’t it.) On the other hand, if a calculator showed my retirement savings were insufficient, I would have license to worry. (Nothing like having a good reason to worry!) Or more realistically, want to do something to change my situation.

Initially I would have suspected that retirement calculators are similar to mortgage calculators. Back when I bought my first home (1979!), to get a mortgage amortization chart, I recall paying $12.00 and having it sent from Boston, and it was printed on a line-printer (remember those?). That was before personal computers. Nowadays you there are plenty online (calculators, not line-printers), and you can make one yourself in a spreadsheet.

But there are differences between mortgage calculators and retirement calculators. For one, all mortgage calculators will give you the same result. Or they should, anyway.

Art vs. Science?
As it turns out retirement calculators are more art than science. For instance, there are many more variables to a retirement calculator. Let’s take a look at a few: your savings rate, personal expenses, inflation, stock market returns, portfolio mix (such as bonds, small cap stocks, large cap, etc.), taxes, spending rate, Social Security and/or pension income, expense ratio of management fees, and so on.

When you use a retirement calculator that does not take into account all/most of these factors, you obviously are using a calculator that is making assumptions about you that may or may not be correct. In fact, likely the assumptions are not correct.

And when one starts to use a few of the calculators, you find that they give very different results. I had hoped to see some similar ballpark results, but they were widely different.

Problems?
So, again using Google, if you search for “retirement calculators problems” you will find a similar boatload of pages like “Why retirement calculators cannot be trusted” and “The trouble with retirement calculators,” etc.

Reading through a few of the analysis of calculators leads me to understand that none are perfect, and many could be misleading.

To sort through all of this, finding a comparison of the most widely used calculators is helpful. Here is the best comparison list I could find: https://www.bogleheads.org/wiki/Retirement_calculators_and_spending

The comparison chart details the features of the listed calculators. I recommend trying a number of the calculators listed. Don’t just rely on one.

Scanning through the list of calculators, I tried a few of the free online calculators with the most features.

Here are the three I found most helpful, comprehensive and interesting:

The Crowdsourced FIRE Simulator (cFIREsim) – Open Source. http://www.cfiresim.com/input.php

cFIRESim has the opportunity to enter a wide range of data, such as assets from different classes, spending expectations, income projections, etc.

New Retirement Simple Retirement Calculator. https://www.newretirement.com/simple-retirement-calculator.aspx

Includes a good mix of input values, such as expenses, income, savings, mortgage balance (if any), etc.

FIRECalc. https://www.firecalc.com/

FIREcalc is my favorite. (I am indebted to Doc G at http://diversefi.com for my first introduction to FIRECalc.) FIREcalc uses historical data to show you the results of your data as if you had retired in every year since 1871. Namely, it gives you a graphical display assuming you had retired in 1871, 1872, 1873, etc., up until the current year.

That might seems bizzare. I am not retiring in 1871! Why bother to even think about it?

As its website states:

“If your retirement strategy would have withstood the worst ravages of inflation, the Great Depression, and every other financial calamity the US has seen since 1871, then it is likely to withstand whatever might happen between now and the day you no longer have any need for your retirement funds.”

It also gives an analogy why its model is a good one:

“Suppose you are building a house in Honolulu. No one could predict the temperature for any given future date during the decades the house will be used. But if you know that it has never been under 52°F in that location in all of recorded history, you could make an intelligent judgment about how much heating capacity is enough.

“Planning for an Anchorage-style winter would be a true waste of money that could be better used elsewhere.

“FIRECalc works the same way, using stock market history and your portfolio and spending plan instead of weather history and furnace capacity, to give you the information to judge if your savings, combined with your Social Security, pensions, and other resources, are sufficient to handle the winter.”

So in that sense, FIRECalc is a reality-based tool. Like being granted some peace of mind.

Check it out.

What has been your experience with retirement calculators?

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