In the past, my opinion of retirement calculators has been less than enthusiastic. For the most part, they assume that people will work until age 65 or longer, have one job, need at least 80% of their current income in retirement, and that no one will have income after retirement other than social security or a possible pension. Aside from Jim’s possible pension, none of that applies to us, so I’ve always been disappointed when the results show that we will need something like eight billion dollars to retire comfortably. That isn’t real world at all.
My opinion has changed recently with the new Personal Capital Retirement Calculator. Finally, a plan that gives options for those of us who live a bit outside the traditional norms!
Real World Assumptions
A calculator can’t be perfect because there is no way to predict all expenses. We might be hit with big home repair or medical bill at any time, but what is nice about the Personal Capital calculator is that it pulls from current spending trends. Even if you do make eight billion dollars a year but only spend $50,000, the calculator is able to process that.
Other nice things about Personal Capital’s retirement calculator is that you are able to add in projected expenses like paying for a child’s education or a big home remodel. You can also estimate health care spending, travel expenses, and just about any other big purchase that might be coming down the pike. I know we will likely need a new to us vehicle every 10 years or so, and we will have to redo our kitchen at some point before selling our house. It’s easy to put those projected expenses into your plan to see how that affects the ability to retire.
A Way To Include Passive Income!
There is also a place to put in expected windfalls like an inheritance or sale of a property. Perhaps my favorite thing is the special category for rental income and expected income earned in retirement. Unlike most calculators, Personal Capital assumes that we might want to continue earning money or have passive streams in retirement. Why did it take so long for retirement calculator gurus to figure that out?
Is Personal Capital Too Pushy?
Once your plan is ready to view, Personal Capital offers a link to click for advice on how to improve retirement planning, usually by controlling fees and making the most income from your investments. For some, this is helpful and for others it might be overkill. I am always open for new options, so it’s nice to have suggestions. I wouldn’t do something because Personal Capital told me to, but in my experience, they do offer solid advice for keeping more of your nest egg.
Obviously, there are some cons. Income growth projection is based on the Monte Carlo simulation method. I’d be lying if I said I had 100% understanding of that type of analysis, but some financial experts think it is too focused on user input and past trends.
Also, if you live in a rural area and use a small bank, Personal Capital might not recognize it. All information will have to be manually entered, which takes lots of the fun out of the whole automated concept.
The other semi-annoying thing about Personal Capital in general is that an advisor will call once your assets are over $25,000, and they can be a bit pushy. You can always decline the calls, but do expect one if you have net worth over that amount.
How Is Retirement Planning Going?
I was very excited to see that we have an excellent chance of not running out of money in retirement. In fact, if we retire at age 51 and 55, assume our properties are paid off, and if we still make at least $1,000 a month in some sort of income in addition to rental money, we shouldn’t have to touch our savings, ever.
Our rental property income should cover all of our expenses for the foreseeable future. I kind of knew that, but it’s very gratifying to see it all in print. We will still keep saving in our retirement accounts, if for no other reason than to save a truckload of money in taxes. You never know if our rental income empire might fail, so it’s nice to have a backup.
If nothing else, Personal Capital confirms that we are on the right track. They did recommend that we put some of our cash saving into investments. Our savings account interest is paltry. I do think that is probably a good idea for someone who doesn’t have rentals or variable income, but I feel better knowing our emergency fund is well stocked for whatever might come our way.
Are You on the Right Track For Retirement?
If your are curious about how your journey to retirement is coming along or if you aren’t sure you’ll be able to retire at all, check out the new retirement calculator. If you don’t have an account, you can sign up for free here. If you already use Personal Capital, you can try the retirement calculator here. It’s better to know where you stand today instead of waiting until the last minute to find you didn’t save enough when you had the chance.
Do you actively plan for retirement or think you’ll just wing in when the time comes? Do you love or loathe retirement calculators?
Disclosure: If you use my link to sign up for Personal Capital, I may get a commission, depending on your net worth. Even without a commission, I still highly recommend the money tracking tools and retirement calculator Personal Capital offers.