What is one of the most important parts of
How about figuring out how much income you're on track to
It not only wins the curiosity sweepstakes -- who doesn't want
to know how much income they're likely to get in retirement? --
it also is a key to figuring out if your nest egg will be big
"Calculators help someone understand if they're on track for
the income they'll need," said Judith Ward, a senior financial
planner at T. Rowe Price.
Online calculators are easy to find. Just remember that not
all make the same assumptions. Many follow different rules when
they crunch your numbers.
Look at T. Rowe Price's calculator, for example. If you scroll
down its Web page, you'll find its assumptions spelled out.
T. Rowe Price assumes a 4.9% annual rate of return in excess
of inflation on stocks in your portfolio. One thing you do, as
you start to use this calculator, is indicate what percent of
your portfolio consists of stocks during your work years. You
also specify your stocks-bonds-cash mix for retirement.
In contrast, CalcXML's 401(k) income calculator lets you
specify what rate of return you want to assume. And it lets you
select other assumptions, such as rate of inflation.
But it does not disclose the asset allocations that go into
its conservative, moderate and aggressive income projections. So
you might have trouble figuring out which most resembles your
With Or Without
The T. Rowe Price calculator lets you include or exclude your
projected monthly Social Security benefit. At CalcXML, you must
switch to other calculators to see the impact of Social
That's actually a strength of the CalcXML site. It offers a
wide choice of specialized calculators.
AARP's calculator lets you plug in your own estimate of your
monthly Social Security benefit, use AARP's estimate or use a
link to the government's Social Security calculator.
"Choose a calculator by asking what you want to achieve," Ward
said. Simple calculators are fine for a quick look at your
retirement readiness. For more precise planning, use a calculator
that lets you input more details.
Fidelity Investments offers a menu of calculators. One does
the math for people who are more than five years from
It can link to your Fidelity and non-Fidelity accounts. You
can click on links that will show underlying assumptions. The
Fidelity calculator's next-to-last stage shows your income at
retirement vs. the estimated amount you'll need. The final stage
recommends what to do if your income is heading for a
Calculators With A Purpose
Fidelity's calculator for people in or near retirement shows
options for generating income. Some involve buying an annuity.
Others let you retain ownership of your assets by taking income
from bonds, stocks and cash.
"Knowledge is power," said John Sweeney, executive vice
president, Retirement and Investing Strategies for Personal
Investing, a unit of Fidelity. "We offer different calculators so
people can focus on the factors that matter more to them.
"If you're in the asset-accumulation stage, we offer
calculators that focus on those strategies," he added. "If you're
in the distribution stage, we can point to different strategies
for people with different goals."