Any retirement planning software takes the figures described below and messages them as described to help you make an estimate of the figure you desire, like:
1. How much monthly income you'll have in retirement OR
2. How much income you'll need OR
3. How much retirement savings you will need to meet your retirement income goals
Your current age informs the retirement planning software how many years you will continue to work (it will also ask when you will retire) and can also calculate the number of years you will have in retirement, given an estimate of life expectancy in retirement.
Age of retirement that you specify allows the retirement planning software to figure out (in combination with some other numbers below) how much you must add to your financial savings before you cease working and determine how big of a retirement nest egg you'll need to finance the number of years in retirement (your life expectancy is pre-programmed in to the retirement planning software)
Current retirement savings is the 'starting point' for your retirement planning software to which it adds and future financial savings and can then determine just how long this pot of retirement savings will last OR how much you'll have the option to draw.
Yearly Contribution to Financial Savings
Here, the retirement planning software must know how much you will be adding to your current nest egg. Some calculators ask for this as a dollar quantity and others as a proportion of your gross earnings. The retirement planning software which you purchase will often allow you to enter this quantity year by year up till your retirement date, thereby allowing for higher computing precision.
This savings until retirement would consist of any additions to 403(b), 401(k), or 457(b) programs as well as your employer contributions to those plans as well as money you might invest outside of your retirement plans.
Rate of return before retirement is required simply because your current retirement savings will grow not only by any amounts you add but additionally the income your nest egg produces. The retirement planning software needs your best estimate based on the way you make retirement investments. For some people, this could be 2% of you keep retirement funds in the bank and for others, a reasonable approximation is 10% if such an investors relies on stocks.
Most of the web-based retirement planning calculators are pretty simple in they do their calculations according to the only figure that you simply enter above. The more sophisticated retirement calculators that you buy (usually $79 to $199) might ask you to enter the information of your portfolio-the precise shares, funds and bonds you possess. It will then check the historical returns and variability of those securities and utilizing those figures and Monte Carlo simulation, illustrate a range of returns and their likelihood to expect later on.
Rate of return throughout retirement is the same idea as above however most people generally do make investments more conservatively once retired. Consequently, the retirement planning software provides you with the chance to reflect the difference inside your investing habits before and after retirement.
Some retirement calculators will ask that you offer these numbers after-tax trying to take into consideration your different tax rate pre and post-retirement. This author prefers these retirement planning calculators that want the gross anticipated investment returns and after that asks for the estimated pre and post-retirement tax rates as distinct questions.
Anticipated rate of inflation is the most annoying question requested by any kind of retirement planning software simply because that is really hard to predict. Use 3% in the event you do not have any estimate one way or the other.
Social Security Income is typically the last bit of information that a retirement planning software needs and you could get this from the social security web site. Set this to zero if you want to don't include this or if you would like any social security income you get to become your 'ace in the hole.'