Retirement Calculators Miscalculate Retirement Investment Numbers

Many of us have plugged our personal numbers into various online retirement calculators.  How much do I make?  When do I want to retire?  How much do I want to spend after I’m free?  And maybe the most difficult question – How long will I live after I retire?

Unless you’re an ostrich (with head-in-sand) about your retirement options, we all want to see how close we are and how long we have to go.  Maybe we want to play with the variables and see if we can quit tomorrow, next year, next decade.  I have tried many, even played with the programming code of one, and I thought they were all pretty much the same, and pretty much accurate.

Boy was I wrong.

According to a report by the Society of Actuaries, online retirement calculators may create more harm than help in your quest for golden Golden Years.

The Actuaries looked at twelve different retirement calculators.  Five free online calculators for laypeople, one which charges a fee, and six which are specifically for financial planning professionals.

What’s the problem with these retirement calculators?

First and foremost, they disagreed with each other on not only what to calculate, but also on the final results.  Even some basics like life expectancy and social security benefits were in dispute between calculators. Some of the calculators didn’t account for investment fees (which can be substantial if you’re not using a self-directed retirement option), and some gave unrealistically high “typical” rates of return on retirement investment.  In addition, spouses and houses (in all their potential glory and otherwise) are rarely considered.

Should you try a retirement calculator, be sure to try more than one and cross-reference the information.   Mark Miller, a journalist who specializes in retirement planning and just published a book, The Hard Times Guide to Retirement, recommends one online calculator in particular – the ESPlanner.  Miller gets points from me because he also recommends a non-commissioned financial planner, which only makes logical, and common, sense. The ESPlanner was designed by Boston University prof Laurence Kautlikoff and has free and paid versions.

Do you have a favorite retirement calculator?  Do you trust it?

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