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Financial Web Sites Calculate Your Ability To Retire

Last Updated: 5/18/2001 10:51:00 AM

Many web sites now offer free tools and information to assist retirement planning. Chief among these features is the retirement calculator. By providing a few details about yourself and your finances they can predict how much you need to save to achieve your retirement objectives. A comparison among a few of these calculators yields interesting results, not the least among which is the insight it provides into the types of factors one must begin to consider in planning for retirement.

Using calculators at MFS.com, Fidelity.com, and Kiplinger.com, ElderLaw News ran tests for its Winter 2000 edition using these two scenarios: (1) a 50-year-old couple earning over $100,000 per year who want an annual income of $60,000 when they retire in 15 years and who have $300,000 saved; and (2) a 60-year-old individual earning $50,000 per year, with $300,000 saved who wants $40,000 per year when retiring in five years.

The MFS calculator provides results that include full color bar graphs, charts, and suggestions on how to improve your situation. Using the default settings, which include a factor of 6 percent of income for the amount that would be contributed towards retirement savings, scenario (1) resulted in a depletion of savings by age 81. Scenario (2) resulted in a depletion of savings by age 75, five years short of the individual''s life expectancy. In short, according to MFS, both need to put more aside or postpone their retirement.

Fidelity''s calculator offers the opportunity to include additional details such as the amount you expect to make working part time after retirement, the amount you expect to receive in Social Security benefits, and your life expectancy. Its default setting is slightly higher for post retirement earnings on investments, at 7 percent versus MFS''s 6 percent. Applying scenario (1), this calculator indicated that the couple should begin saving an additional $251 monthly to achieve their goals. Scenario (2) required $2,168 additional monthly savings or 52 percent of income, unlikely to happen.

The Kiplinger calculator adds a couple of features, such as a life expectancy calculator and an adjustment for investment style, and keeps the whole process on one page. For scenario (1), it found that the couple should begin saving $2,564 annually, and for scenario (2) $4,854 a year, quite a bit less than Fidelity''s results.

Although the calculators yielded different results, this was a function of the variances in what the different companies suggested for additional relevant data. Whereas the Fidelity site presumes a life expectancy of 90 years, MFS and Kiplinger calculate life expectancy from tables. In addition, where MFS and Fidelity both indicate the numbers that they use for inflation and rates of return, and allow the user to adjust these, the Kiplinger site hides these numbers; it also compels the use of ranges for income and age.