Are You Saving Enough Money For Retirement?
Tuesday, March 10th, 2009If you are making a contribution to your 401k, then you may want to start using a retirement calculator before you put any more money away for your future.
Using a retirement calculator is a must. They are all over the Internet. The more detailed the better. They can help you determine how much money you will need for your future. It sure beats guessing.
Some financial calculators only give you a basic idea of what you will need. They do not take into account taxes on your 401K when you withdraw funds, or variability in investment returns over 20 or 30 years. I know you may want a simple answer, but in this case, the more complex the calculator, the better.
You may want to try to tackle a more sophisticated piece of software. That’s not the answer you want to hear, but you might be happier knowing the truth. The alternative to plan properly could bankrupt you in your old age.
One of the things that your retirement calculations should try to adjust for is the effect of taxes and withdrawals during retirement. This can be very difficult and in many instances almost impossible. Try your best. At worst case, you can assume that taxes will not decrease over time.
Most people believe that taxes aren’t going away any time soon. If you are like most people, it is probably best that you factor in the effect of them during retirement. Also consider whether you would rather pay tax now and get money tax-free during retirement (as you can do with high cash value life insurance or a Roth IRA) or if you’d rather pay tax on a larger sum of money (as you do with a traditional 401k or IRA).
