Retirement Calculator
How they work and what you need to know...

Here's how a retirement calculator works and what you need to know...Here's where this site will differ greatly from other sites.

Most sites they just offer a form for you to fill in to find out how much is enough to retire. Then you get some answer that you probably will never understand. Which is often backed up by how their products can help you, uh!

In almost all the retirement calculator sites I have seen, there's only vague information on how much money is enough is calculated.

Here that is all different.

This page will try to give you an understanding of what you need to have for a retirement calculator site then I will give you a few sites to can use to help you.

Before I go into some averages to help you understand how much you'll need to retire on, let's have a look at why it's so important to understand what you are looking for when using a retirement calculator.

Firstly if you don't know how much is enough, then who will?

*The government? Nope. And if you look at any of their workings, you end up amazed at how different the standard pension is to what you will need!
*Your children? Some hope.
*Your bank manager? Afraid not.
*Your accountant? No but might be able to help check what you've done.
*Your financial advisor? No but they will help you get there and have some ideas.

so in the end it comes down to YOU.

OK So it’s down to you, what do you need to look out for?

Firstly, yourself, there's a fundamental principle here: you always tend to estimate that you can get things cheaper than they really are and you'll often forget things (that you later excuse yourself for by saying "uh, that must have been in the miscellaneous column"). So although they are by no means perfect a retirement calculator will give you a start.

But 9 out of 10 people will make this mistake, Yes that’s right they will look high and budget low...

So be careful when you work things out, write down as much as you can then get it checked, by an expert. This is where a retirement calculator used properly can start to help.

Next understand what you will be asked by the retirement calculator.

This can be derived from other sites where you put in details about your medical history, age of parents or their age at death, family incidence of cancer, number of times you exercise etc

2. When you plan to retire.

This will probably include you spouse.

3. How much you have left to pay out of all of your debts.

This includes you house, credit cards, loans etc

4. What dependents you have.

Will they still be living with you in your retirement?

5. Outgoings

Although these just maybe factored from an average in your area.

6. Lifestyle

What type of life style you want to follow.

OK so they how have all that info on you in the retirement calculator. What happens now.

Well this info is taken off the screen input by the retirement calculator and thrashed through a set of actuary’s tables. These tables are made up of lots and lots of statistics from the last 100 years about how long people live after retirement.

Once all the thrashing has finished the retirement calculator will give you their best guess of how long they think you will live and now much somebody living in your area with your type of outgoings will need.

As you can see this is extremely Average - because that is what is being used by the retirement calculator. Averages. Now there is nothing wrong with this as a start. But there is so much that can affect it that you should only ever use it as a base to work from.

I can tell you one thing though. In 85% of cases most of you will not have saved enough. And that is a guarantee. Why do I know this? Well every country, apart from South Africa, has stats that show 90% of people over retirement are on some type of government-funded scheme. Now some of that might just be cheaper drugs and bus ticket exemption, but most of the time it means that the government are helping to pay a big chuck of peoples living expenses.

Why is that the case...

Simple people did not save enough, they were told that the government would look after them, and my word is that coming back to hound the policy makers now, or they were part of some company scheme. That may or may not be any good, but more often that not is only a top up to the state pension.

OK So you have gone off and found out some info about how long you are going to live and how much the average person might need what do you do now...

Refine, plan and educate yourself a bit.

Research shows there are three phases to retirement. I have not come across a retirement calculator yet that helps you to this finer level. If I do I will post it here.

so what are the three phases?

The first phase is active, where you're enjoying being active, going out, playing sports, but you don't need much support. This is quite an expensive phase.

The second phase is where you become more subdued. You slow down a bit, but still can manage on your own. But as you slow down, so does your spending because you can still look after yourself but don't need to spend all the money on the more extravagant things you were doing.

The final phase is where you start to become reliant. This may not mean you are in a nursing home being feed through a straw, but maybe you need home help and can't manage the garden like you used to. Or maybe a bit of medical help, like a nurse to help with some prescriptions and medication. During this phase your outgoings tend to increase. There are high costs of drugs and outside help. You may or may not be able to get family to help you here. But it's best to plan to have enough money to take care of yourself and not be a burden on your family.

So next time you go to one of these retirement calculators you will know what to say to them and know what they are saying to you.

Have a look at this retirement calculator