Scenarios to Try with a Comprehensive Retirement Calculator
There is so much more to retirement planning than having enough savings. And, you have more options than you think when it comes to having a secure retirement. A comprehensive retirement calculator will enable you to try different retirement scenarios – exploring infinite possibilities between working, saving, investing, spending, leaving something behind and more. There are hundreds of different variables that can dramatically impact your wealth, retirement date, estate value, and retirement security.
Below are 15 retirement plan categories with lots of different ideas for scenarios to try using a comprehensive retirement calculator. As you experiment with these ideas for your finances, you will be able to:
- Assess the trade offs of each possibility
- Make more informed decisions about your finances
- Mix and match different options for a stronger more secure plan for your future
A Simple Retirement Calculator Won’t Help
You can try any of the ideas listed below in a few of the detailed and comprehensive retirement planners that are available online. However, a simple retirement calculator won’t work for running most of the following scenarios.
The NewRetirement Retirement Planner is one option that enables everything listed here and more. This tool has the added benefit of giving you real time feedback on each and every change you make to your plan. Whenever you alter a piece of your information, the system calculates how that change impacts your:
- Out of Savings Age: The age at which you will have used up all of your savings
- Estate: Your estate is the value of your projected assets and projected home equity, calculated for your stated life expectancy.
- Taxes: Your lifetime state and federal tax liability.
- Projected Income, Expenses, and Savings Balances: See how your income, expenses and savings change over time.
1. Run Scenarios on Your Longevity
There is a big difference between how much you need to retire securely if you live until age 75 vs living until age 95 or longer.
However, most retirement calculators use average life expectancy and don’t let you deviate from that at all even though the average life expectancy is essentially meaningless to most of us. Half of us will live longer than average and half of us will not live that long.
When planning your retirement, you should probably use your best case longevity age — the longest you think you might live. You could also try a longevity calculator to get a more personalized estimate.
2. Run Scenarios on Inheritance Goals
Most retirees hope to leave something behind for heirs. A good retirement calculator will help you see what might be a reasonable expectation and let you set goals for an inheritance.
3. Try Different Options for Your Social Security Start Age
Most people don’t realize just how valuable waiting to start Social Security is to their retirement security.
If you have not already started your benefits, you should definitely look up how much you will get at different ages and plug those numbers into a comprehensive retirement planner. Most people are really surprised by how much the delay can positively impact your financial well being throughout retirement.
And, if you are married, try different starting ages for both yourself and your spouse. Additionally, you will want to look at what happens to your plan if the higher earner defers the start of benefits as long as possible up until the maximum retirement age of 70. Don’t focus on who is older. Or, who retires first. The key is to make sure the highest earner grabs the highest possible payout. This is probably the single smartest retirement decision married couples can make.
4. Run Scenarios on Retirement Age and Work Income
Most retirement calculators ask you to enter your “retirement date.”
However, retirement age just doesn’t mean that much anymore. The reality for most of us is that we either transition toward retirement by going part time or we retire and then get some kind of retirement job. Others take a break from work and then resume in some capacity a year or two later.
Instead of entering a retirement date, look for a retirement calculator that allows you to set different levels of work income for different periods of your life and play with those variables.
If not yet retired, you should also see what happens if you were to unexpectedly lose your job or not be able to work due to a health issue — both of which are fairly common scenarios.
5. Experiment with Investment Returns and Annuity Purchases
Investment returns are something many retirees are pretty worried about. Why not use a retirement calculator that lets you set returns for each account that you actually have? You should probably also play with different configurations.
What would happen to your overall plan if you were to:
- Construct a bucket approach with one account invested aggressively for long term growth, another more conservatively and a third very conservatively.
- Purchase a lifetime annuity to cover the difference between your guaranteed retirement income and your expenses.
- Earn high rates of returns or low. (The NewRetirement tool enables you to set optimistic and pessimistic rates of return for each account. Be sure to try different ranges.)
6. Run Scenarios on Savings Rates
If you are not yet retired, it can be really motivating to model saving even just a bit more each year.
The NewRetirement system lets you set different savings rates for different periods of time. It can be interesting to experiment with when you might get a raise and adding all of that extra income or just a portion of it to your savings. Or, can you increase your savings rate by a certain percentage each year?
You can also experiment with saving to after tax or pre tax savings.
You can also specify employer matching if your company is contributing to your savings.
Be sure to also enter any times when you might be able to add a lump sum one time contribution to your retirement savings. Will you get a tax refund? Expecting an inheritance?
7. Run Retirement Scenarios on Expenses
Playing with different spending rates can be the best way to strengthen your financial future. Can you cut costs?
Consider playing with the following scenarios:
- Try thinking in 5 year increments and estimate how much you might be spending in each time period.
- Budget based on phases of retirement:
- In the first phase of retirement, you might be spending more money than when you were working
- As you get older, your spending may slow down
- In late retirement, you may be spending much less than you are now on monthly expenses (though your healthcare spending is likely to spike.)
- Predict big one time expenses. Maybe document money for a big trip, education for children, a second home or other.
- Get really detailed about how much you predict to spend in different budgeting categories.
- Document just what you genuinely need to spend (not including wants).
It can be very interesting to model spending using different methods and compare results. For more ideas, explore 9 tips for predicting retirement expenses.
8. Run Roth Conversion Scenarios
You might also look at modeling a Roth conversion to assess the impact of this option.
A Roth conversion is when you take money that you have in a traditional 401k or IRA account and move it into a Roth 401k or IRA.
When you do this, you will need to pay taxes on the money you withdraw. However, any future gains will grow tax free. Learn more about the pros and cons of roth conversions.
9. If You Have a Pension, Compare Your Options
Not all retirement calculators allow you to enter pension income.
If you are lucky enough to have a pension, you should definitely use a calculator that allows you to document pension income, including COLA adjustments, tax status of benefits and survivor benefits.
You will probably also want to compare getting a lump sum vs. monthly benefit.
10. Run Different Housing Scenarios
For most people, their home is their asset with the greatest value. However, only a few think through scenarios of how and when to tap their home equity to help with retirement expenses.
Here are a few future changes to housing that you might want to try out:
- Refinancing your mortgage
- Accelerating your mortgage payments (paying more each month)
- Downsizing or upsizing — either at retirement or at some point in the future
- Getting a reverse mortgage
- Renting out a portion of your home
11. Run Scenarios on Your Credit Card, Medical and Other Debt
If you are near retirement age and have other debt (credit card, medical, auto loan, etc…), then you might want to think of ways to accelerate paying off these liabilities.
- You can enter each debt separately and try different monthly payment amounts.
- Model consolidating debt into a lower interest option
Explore 13 tips for retirement debt.
12. Medical Expenses
Medical expenses are HUGE for everyone. Fidelity estimates that the out of pocket costs for an average 65 year old couple will be $285,000 — not even including long term care.
Different retirement planning calculators have different ways of dealing with medical costs. The NewRetirement system helps you to create a personalized estimate by using your health status, location, type of coverage and other factors that impact your costs.
13. Try Out Different Inflation Rates
Like medical expenses, inflation can be a really big factor for your financial security.
Inflation is a term used to describe the increase in the general prices of goods and services. Inflation describes prices increases. For example: If a loaf of bread costs $1 and inflation is at 3%, then the cost increases to $1.03.
Over the last 50 years, inflation rates have ranged between a high of 13.5% in 1980 to a low of -.4 in 2009. You should definitely try different inflation rates in your plan and estimate how well you can weather highs and lows.
14. Assess for Excess Income and Accumulated Debt
When projecting income and expenses for 20 plus years into the future, it can be easy for these categories to get out of sync. You might have more income than expenses in some years and the opposite at other times.
The NewRetirement planning calculator lets you accumulate this debt. You can also see your excess income and can decide how you want it applied.
Learn more about the excess income feature.
15. Assessing Different Scenarios for a Long Term Care Need
According to the U.S. Department of Health and Human Services, long term care is required for at least some period of time by the vast majority – a full 70% – of people over 65. However, most households underestimate the costs of long term care and don’t have a good plan for this very big expense.
You should try out different scenarios in a retirement calculator for covering these costs:
- Relying on a family member to help you
- Purchasing long term care insurance
- Using a deferred lifetime income annuity
- Tapping home equity
- Using up resources, then qualifying for Medicaid
About the NewRetirement Comprehensive Retirement Planning Calculator
The NewRetirement system is the most comprehensive retirement planning calculator. This detailed tool is designed for anyone who is worried about their retirement — especially people nearing the end of their careers or just beginning this stage of life. It is easy to get started, see a personalized assessment and find ways to strengthen your plan.
Best of all, your data is always saved so it is easy to try different scenarios, make adjustments and manage your finances moving forward.
This tool has been named a best retirement calculator by the American Association of Individual Investors, Forbes Magazine, The Center for Retirement Research at Boston College, CanIRetireyet and many more.