Retirement Planning Calculators
July 30, 2010
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A recent article by syndicated columnist Mark Miller discusses popular retirement calculators and flaws that could lead to serious miscalculations when planning for retirement.
Twelve retirement calculators created by financial services firms, software companies, nonprofits, and the government were analyzed by the Society of Actuaries. Six of these calculators for consumers are free of charge. The Society published a report outlining key things to look out for when using retirement calculators:
• Social Security Projections. Most retirement calculators project Social Security income using current earnings, age, and the year a person expects to retire. The best projection tool is available from the Social Security Administration; the projections are based on a person’s actual earnings history.
• Rate-of-Return Assumptions. Three of the five free calculators used pre-set future investment rate-of-return assumptions that cannot be changed. The percentages for the rate-of-return varied widely; some assumed five percent, while others assumed ten percent. You must be comfortable with the pre-set rate of return in order to use the calculator.
• Life Expectancy. Some calculators automatically input the life expectancy figures. A 65-year old man can expect to live another 17 years, and a woman of the same age can expect to live another 20 years. The calculators that automatically input the life expectancy figures do not take into account differences based on race, income, and gender, and they also do not take into account that a person may live longer than the averages. If you are given the opportunity to input the life expectancy prediction, you should base your inputs on your health and family history.
• Housing. The calculators vary in the assumptions they make about what you may do with your home in retirement. Few analyze the impact of carrying a mortgage into retirement; some assume you won’t liquidate your home, while others assume you will sell and downsize.
• Inflation. None of the free calculators included inflation as a risk in retirement planning. Some tools use a default inflation rate ranging from 2.3 to 4.6 percent, while others let you use just one inflation percentage forecast. Inflation can vary widely over time, and the calculators can provide inaccurate information on the purchasing power of your assets in retirement.
• Spouses. Few calculators assist couples in forecasting retirement income for a surviving spouse. They rarely allowed couples to enter separate information and different retirement dates for each spouse. Social Security benefit issues for couples can be complex and are outside the scope of an outline calculator. Couples will want to run several calculations using different life expectancy scenarios in order to better determine the income needs for both spouses.
Although retirement calculators can be helpful tools, the Society of Actuaries report highlights the dangers of do-it-yourself financial planning. The attorneys at Oast & Hook can help clients and their families with their estate, investment, insurance, veterans benefits, and life care planning needs.
O&H: Allie, we’ve had a quiet hurricane season so far. Let’s hope it stays that way. But, disaster can strike at any time, so please give us some disaster planning tips for pets and their families.
Allie: Sure! It’s best if your pets and you are together during a disaster, but sometimes disasters strike when you are not at home. Make sure your neighbors know how many pets you have, and keep a current rescue sticker on your front door. The rescue alert stickers are available for free from the ASPCA. You should assemble a disaster kit for each pet, and the kit should be labeled with your name, phone number and address, as well as the contact information for your veterinarian. The kit should include copies of your pet’s health records, including current rabies vaccinations and licenses, your veterinarian’s contact information, and a form authorizing veterinarians to treat your pet. These documents should be in a watertight container. The kit should include food and water bowls, at least one week’s worth of food and any medications for your pet. You may not be able to replenish supplies and medications if disaster strikes. Toys and bedding are an important part of the kit. Familiar objects can help lower your pet’s stress level. Next week, I’ll discuss your disaster plan and what to do if disaster actually strikes. Time to go find my disaster kit. I hope my Mom put one of my laser toys in there. See you next week!
Oast & Hook attorney Andrew Hook recently gave a podcast interview on the topic of estate planning. To listen to this podcast, please visit http://tinyurl.com/398jwvc.
Oast & Hook will hold its quarterly Social Workers and Administrators Breakfast on Wednesday, August 18th at the Virginia Beach Central Library, 4100 Virginia Beach Boulevard, Virginia Beach, Virginia 23452. The topic is life care planning. Registration beings at 9:00 a.m., and the presentation begins at 9:30 a.m. Questions will be answered from 10:30 a.m. to 11:00 a.m. The breakfast is designed to be both a networking opportunity and also an educational opportunity for area professionals who work with seniors, the disabled, and their families. Seats are limited, so please register early for this breakfast by phoning Jennie Dell at 757-967-9704.
Oast & Hook attorney Letha McDowell will speak on the topic of elder law at the monthly meeting of the Norfolk Retired Employees Association from 10:30 a.m. to 11:00 a.m., Friday, August 27th at the Titustown Recreation Center located at 7545 Diven Street, Norfolk, Virginia 23505. For more information on this organization, please visitwww.norfolk.gov/retirees.
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