Imagine you’re being shipped to a deserted tropical island. What one item would you take? Now ask a thousand people the same question. We’d face similar conditions but would choose different things. Some would go for survival – drinking water, fire starter, Swiss Army knife, or a first aid kit. Others might go for comfort – sleeping bag, comfy recliner, hair conditioner, a solar lamp or a tube of lipstick. And the creative might take a lifetime supply of Tecaté.
There are many choices in online tools for a game of Financial Survivor including retirement, insurance and tax calculators. Perhaps not the utility of a shiny Leatherman tool, but useful gadgets nonetheless. These tools help you see finances in a unique way and explore different “what ifs” so that you stay on track with financial goals, protect your loved ones and have flexibility and freedom to do the things you love to do. There are tons of tools – you can visit websites such as your favorite financial institution, AARP.org, or Dinkytown.net where you’ll find over 400 calculators for free.
What are your favorite online financial tools that make planning easier? We surveyed our Sage Financial team and here are the top five calculators:
You’ve got to be more serious than anyone on the planet about your finances. Spending plans are important for several important reasons – living on less than you make, knowing where your money goes, and funding emergency reserves (rainy day fund). Online tools range from Excel spreadsheets to those with supporting processes and forums (communities) such as YouNeedABudget.com, Dave Ramsey and others.
Financial priorities often shift in time. Often, the early goals are to accumulate emergency reserves and pay off debt. It’s a joy to watch a person or couple see what it takes to get out of debt (payoff accounts with smallest balances first then move to the next, refinance to lower rates, making extra payments to the mortgage, etc.). And lower rates are the payoff of building and protecting your credit rating.
How much do you have to save for a comfortable retirement? What is your projected social security retirement? When do you take social security benefits – age 62, full retirement age or 70? Are your earnings being accurately reported to social security? The maximum monthly social security benefit in 2018 is about $3,698 whether you’re 62 or 70. It’s designed to replace about 40 percent of a retiree’s pre-tax income. The more you make, the lower the percentage of income social security will replace. Your monthly benefit is figured around something called “bend points.” Example – if you were born in 1954 or later, you’d be credited about 90 percent of average monthly income to $895, 32 percent between $895 and $5,397, and 15 percent for the excess; add them all up for the retirement benefit payable at full retirement age. Log on to ssa.gov and sign up.
Bank Rate is rich with interest rate information for both savers and borrowers. It includes regional and global market data including major indices, CD and loan rates. And it’s a good resource to shop for online money markets to check out competitive yielding alternatives for cash reserves.
Most people hate getting surprises including unexpected tax bills and underpayment penalties. Ask your CPA or enrolled agent for 2018 tax estimates or go online for tax tables. There are significant tax law changes and your situation may have changed – new job, major asset sale, family change, and others.
What about how much do I need to save so I don’t run out of money in retirement calculators? Absolutely retirement calculators are important for planning. Prudently used, they can help us by showing us the probable future impacts of decisions we make today. There are numerous online tools including some of the websites previously mentioned, your 401k plan provider and others. However, they vary from simple (a couple of variables) to complex (numerous variables), and a very user-friendly (simple) calculator might be a poor simulator of reality.
3 Reasons Retirement Calculators Don’t Work
- Generally, retirement calculators attempt to answer a very basic question, “We have savings of $X…will it last our lifetimes if we spend $Y per year?” However, life is seldom a straight line and periodically surprises us. What if we don’t live the same number of years (or live longer than expected) – how do we protect the survivor (or hedge our bets)? Our spending in retirement will vary – higher in the early years, stabilize in the middle, then kick up in our later years – how do we plan for that? We’re a blended family – we’ve got my wealth, his wealth and our wealth – how do we factor that and keep peace in the family? We’re planning to resize our home once, maybe twice as we move to be closer to the grandkids – how does that impact our future?
- Can’t maintain our desired lifestyle – This rhymes with haven’t saved enough. What is feasible with a financial reboot? Work longer? Spend less? How do you re-prioritize the goals? How do you negotiate a re-alignment?
- We (I) don’t want to do this alone – Sometimes it’s a confidence thing (moving outside the 401k cocoon) and other times it may be complexity or you’d rather be doing other things in life. This is where delegation, partnering or simply having a feedback mechanism to help you think things through is needed.
In closing, some projects are completely do-it-yourself, and others are where you use tools to validate what’s being recommended to you or confirm your thinking. Remember, they’re tools, and sometimes you need a special touch. Imagine three people standing in line at Home Depot. We’ve each got an orange bucket containing the same tools – the same brushes and paint. It’s you, me and a guy named Michelangelo. One of us will have a very special outcome.