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Retirement calculators can help you                                                                        Advertisement

prepare for the future
Updated 6/30/2006 8:45 AM ET
By Christine Dugas, USA TODAY

Retirement may or may not be a long way off, but it never hurts to find out if you're on the right
track. Even if you'd rather not pay a financial planner, there are free online retirement
calculators that can help you check out your progress.

Before you settle on any one calculator, though, you'll want to make sure you pick a good one.

To help you get started, USA TODAY called on Sheryl Garrett, founder of Garrett Planning
Network, a group of fee-only financial planners who provide advice for an hourly rate. Asked to
try out several retirement calculators and evaluate the results, Garrett applied a fictitious
married couple (see chart) to four calculators.

Some calculators ask you to include your Social Security benefits in projecting retirement
income. Garrett, though, says it might be unwise to do so. After all, Social Security income
may not fully materialize for those under age 50.

One way to be safe is to use half your expected Social Security retirement income in a
calculator. Or have a calculator produce two results: one with your Social Security benefits, the
other without. Either option can help you get a fairly realistic estimate of how much you need to
save. If you end up with more money than you'd expected, Garrett notes, it'll come in handy for
what could be colossal health care costs in retirement.

The calculators work in varying ways. Some ask for your pay; others don't. Some ask for your
total savings; others look just at retirement assets. Some, but not all, distinguish between tax-
deferred and taxable funds. All give an estimate of how much you'll need.

You not only have to decide how to reply to the questions; you also must check your numbers.
Any errors could skew the results. Whatever you do, don't put off checking your finances until
you're near retirement. "Time is your best ally," Garrett says.

Here are four calculators, with tips on using them. Click on the blue links to go to the sites:


NASD oversees brokerage firms, so it seems like a smart source on financial issues. Unlike many others, its calculator is
quick and easy. But before you use it, there's an important warning: "Don't rely on its default estimates," Garrett says. For
example, unless you input how long you expect to live, the calculator defaults to age 85. Relying on that could lower the
amount of money you need to save if you actually live longer than that, as many of today's baby boomers will. 8/23/2006 - Retirement calculators can help you prepare for the future                                             Page 2 of 3

Garrett also noticed that unless you adjusted your tax rate in retirement, the calculator defaulted to 15%. She says it would be
more prudent to use 25% or higher, because tax rates are now at historically low levels. Future tax rates may be higher.

The NASD says it's been re-evaluating its retirement calculator for some time and just last week adjusted the tax-rate default
from 15% to 25%, says spokesman Herb Perone. It also plans to produce a longevity calculator that'll help you make sure
you don't outlive your retirement income.

Once you adjust the default estimates, Garrett says, NASD's calculator gives a credible retirement estimate.


AARP is the non-profit group for people 50 and older. Its calculator, more detailed than NASD's, can combine information
from two partners. It also lets you change your projected investment rate of return over time. Keep in mind that anything more
than 7% is too high, Garrett says. "You only want to be surprised on the upside." And as you age, your projected return on
investment should decline, because most of us start shifting to more conservative investments.

The calculator has you fill in your life expectancy, though it goes up to only 99. So it may not help you plan for enough money
for living to 100 or more. Asked about this, AARP says only about 10% of Americans expect to live to their late 90s or older. It
tried to create a tool that is a quick gauge for most people, says Jean Setzfand of AARP.

Among other things, the calculator asks for details about your retirement-account contributions. But if the amount you save
varies from month to month, it's better to say zero, Garrett says. Then, after the calculator tells you how much you need to
save, you can subtract a rough estimate of how much you're actually saving to arrive at a realistic figure.

•EBRI's Choose to Save Ballpark Estimate

EBRI, the Employee Benefit Research Institute, is a non-profit research group. Like AARP, it puts you through detailed
financial questions. Both these calculators let you include wages after retirement. (These days, many people will live for years
after they retire and continue to earn money, though typically from work that pays less than the jobs they left.)

Unlike AARP's calculator, the Ballpark Estimate lets you set up a life expectancy over 100. Couples have to separately fill out
Ballpark Estimate calculators.

Garrett says the Ballpark Estimate is a good calculator, but she thinks one question is a bit confusing. It asks you to enter a
replacement rate, which, it explains, is the portion of your current income you'd like to receive in retirement. It'd be easier, she
says, if it let you input a dollar amount instead of a percentage.

Jack VanDerhei, an EBRI fellow, says the group will announce later this summer a new online feature that'll help you
determine an accurate retirement replacement rate.

•T. Rowe

T. Rowe Price, a mutual fund company, offers a calculator that it calls a retirement planning worksheet. It's helpful and easy
to use. But it also has some defaults you should carefully consider.

One question, for instance, asks for the rate of return you expect to earn on your taxable investments between now and
retirement. Unless you input your own estimate, the default is 8%. But if you rely on that figure and your investments don't
fare that well, the results would overestimate your retirement savings.

Nor does the calculator ask for Social Security benefits. It asks how much of your current salary you'll need in retirement to
maintain your lifestyle. If you're over 50 and expect Social Security benefits, be aware the results won't include them in its

Garrett says all four calculators have benefits and limitations. And because they rely on different assumptions, it's hard to
assess accuracy. Still, Garrett thinks EBRI's Ballpark Estimate makes the best real-life projections. She says it's the most
flexible, allowing for such factors as post-retirement job income.

But if you're young and haven't saved much for retirement yet, you might want to start with one of the easiest calculators,
such as NASD's. Or try two different calculators. Though the assumptions won't be identical, they'll give you a range for how 8/23/2006 - Retirement calculators can help you prepare for the future                                            Page 3 of 3

much to save.

A calculator can help focus your attention on saving more money for retirement. But it shouldn't be all you rely on. For more
comprehensive help, a certified financial planner may be worth considering.

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