Are All Retirement Calculators the Same?

All retirement calculators are not the same, according to a Society of Actuaries study, that points out that some of the differences in available retirement calculators could result in a less than accurate analysis. If the desired calculation is to determine if you have enough money to retire, there are a number of issues to watch out for with many retirement calculators - whether the calculators are available from the government, large investment companies or even some financial experts.

Retirement Calculators and Social Security

Social Security is one area where some calculators may be too simplistic, according to the Society of Actuaries study.  Since Social Security benefits generally offer up to 40 percent of retirement income, an accurate assessment is particularly important. One way to resolve the problem is to separately get a Social Security calculation from www.ssa.gov - the government website for Social Security. That way, problems such as a lack of cost of living increases will be addressed.

Rate of Return on Retirement Income

Another area in which all calculators are not the same comes with the calculation of investment income over time. Some retirement calculators have pre-determined yearly increases, but it can be extremely beneficial to be able to separately input different rates of return on 401K, IRA or other investment income, according to the Society of Actuaries. There are some retirement calculators that perform stock market simulations - using the past 50 years or more of stock market history. These can be quite helpful because many will compare the results of the simulations to the income needed for retirement and include the probability of your investment income reaching the desired level.

Mortgage Payments and Retirement Calculators

An additional feature to look for in retirement calculators is the ability to factor in mortgage payments. Most retirement calculators don't include that feature, according to the study by the Society of Actuaries. However, more people are refinancing mortgages later in life, thus carrying mortgage payments into retirement. This has a significant impact on the income needed for retirement

Spouses and Retirement Calculators

Another area in which retirement calculations are not all the same comes with several options available to couples. For example, the amount of money a person will draw from Social Security will be reduced if a surviving spouse option is selected. While the monthly benefit will be lower, the surviving spouse will receive lifetime benefits. Retirement calculators that make recommendations on annuities, for example, do not always include the choice of a survivor's benefit option. Making sure that your retirement calculator includes all the variables that relate to your financial picture ensures an accurate financial forecast.