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Retirement Calculators – Why They Are Useless!

Imagine being in retirement and then checking your financial accounts and realizing that you don’t have enough money to live on. You will have to go find a job, and jobs for older people aren’t easy to come by. This can leave you in a tricky position. No one wants to be without the money to live in retirement. This statement is usually used to encourage people to find a retirement calculator.

Statements like that aren’t the only place to find such scare tactics, advertisements and commercials are promoting the use of a retirement calculator. These calculators are supposed to add up a collection of factors that will be able to tell you how much money you will need to live the way you want. Information input varies based on the calculator but often includes, current age, retirement age, amount saved so far, income, and the rate of savings. But do these calculators actually work?

A retirement calculator can be helpful to show that you need to save more but there is no way to predict everything. These retirement estimators are given more faith than they deserve. Planning for the retirement is kind of like predicting the weather. You can never be too conservative. Here are some of the main reasons that retirement calculators don’t work.

Why Retirement Calculators Don’t Work

Retirement calculators work by making a serious of best guesses about what life will be like when it comes time for you to retire and how your life will fair. Some retirement calculators allow these factors to be tweaked more than others but all they are are guesses. This isn’t just guesswork though, it is generic guess work that is based off of what financial experts think are the average person.


One of the first guesses of retirement income calculators is that you will spend a certain percentage of your income every year and that it won’t change. Most calculators use the idea that you will spend about 80 to 85% of your pre-retirement income every day, month, and year. This doesn’t take into account larger purchases or if you spend more or less during retirement.

While the 80 to 85% income will work for the average person today. It won’t be right for everyone. There is also no way to plan for the random things that happen in life.


Over time the value of the dollar changes. More specifically over time prices increase while the value of the dollar goes down. That means twenty years ago $20 would buy a lot more than it can buy today. It is hard to account for inflation when using a retirement calculator. While we can predict what inflation will look like there is no way to know for sure. Depending on the state of the world it can go either way.

Inflation has cost many people a stable living in retirement. Multiple times throughout history this has happened to people where they started life with the value of the dollar being low but when it comes to retire the dollar is worth far less.

retirement calculator

These calculators use a generic 2% increase in inflation every year. The problem is that no matter how much experts try they cannot predict inflation. It is constantly changing and there are many factors that are involved. Many of the same reasons that retirement calculators don’t work are the same reasons. The state of the government, state of the financial world, medical crisis’s, and spending all affect inflation.

Change Of Lifestyle

As you grow older you are more likely to get promotions and new jobs as you advance in your career field. Because of this you might end up buying a new house, a new car, and making other financial decisions. These decisions can affect your cost of living. A retirement calculator can only show you the projections for what your current cost of living is with a percentage increase. You do not know where you are going to go down the road.

Medical Problems

It is hard to deny that as you get older you tend to have more health problems, not less. You should be prepared to have at least one major medical expense if not more. Retirement calculators don’t take into account the expenses that we might need when it comes to medical issues.

A more advanced retirement calculator will take into account medical conditions you have now but as you grow older there are conditions that will start to pop up. Vision loss, arthritis, and hearing loss are just a few of the minor issues. This is nothing compared to having a serious medical issue such as Alzheimer’s or cancer.

Government Calculations

While you can make calculations for what government assistance currently covers we don’t know what the state of the government will be when it comes to retire. For people who are just graduating college there will be about forty years before its time for them to retire. A lot can happen in that time.

retirement calculators

There are always rumors that retirement won’t last. The state of economy could hint that retirement support may be reduced.

Rate of Return

The rate of return for your investments can depend based on how good or bad the market is doing. Retirement calculators use an average rate of return for investments. This also doesn’t take into account the rates that are specific based on the investments used. The rates of return on your investments will vary based off of the type of investment.

Life Expectancy

The average human life expectancy has gone up in the last twenty years and is predicted to continue to rise. Retirement calculators for the most part calculate out to a specific age. You have no way of knowing how long you are going to live so while you can plan for today’s average lifespan, can you really plan for tomorrows?

Living Vs. Fun

You also don’t know how you are going to want to live down the road. Planning just to live might mean you will meet your retirement goal sooner but do you really want to plan to just live? Don’t you want to plan to have fun and do what you want in your retirement?

There are a lot of factors that go into calculating how much money you will need to retire. At least a handful of those factors are unknowns. However, using a retirement savings calculator is a great way to get a baseline of around what you should plan for but you should speak with a financial advisor. They can help you better utilize retirement income calculators. Here are some tips to better prepare for the future and your retirement.

Plan, Evaluate, Monitor

The first step in saving for the future that the retirement income calculator can’t help you with is the planning. You need to make sure that the savings you are going to invest in are the right ones and enough to keep you going through the years. You probably have heard it before but you can never start planning soon enough.

If you already have retirement investments in place you need to evaluate and monitor them regularly. Time changes all investments and you need to know what is happening with them. The last thing that you want to happen is for your stocks to go under but you weren’t monitoring them because you were going to sell them before you retire. Along the same lines, if when you evaluate your situation and you discover that you no longer have enough savings to maintain your lifestyle it is time to think about investing more.

You cannot simply leave your retirement investments to work on their own. Doing so can put your whole future at risk.


The first way that you can help your future is to diversify your retirement. Diversifying is the process of having your investment portfolio spread around a variety of different investments. This means that you don’t just invest in one retirement method. This helps to make sure that should something happen to one investment method you will still have funds for your retirement.

Here are some ways that you can diversify.

Gold and Other Precious Metals

Gold, palladium, silver, and platinum are just a few of the precious metals that you can invest in to help secure your retirement. Gold is the best option for most people because of its higher value and its popularity. These metals are some of the oldest currencies in the world and are still recognized by multiple governments around the world. As such metals are a good investment.

retirement calculator gold

Precious metals are also a good investment because they do their best when economy is bad. Think of gold as the backup in your portfolio should something happen to the price of the dollar or other problems in the economy. It is always a good idea to have a backup plan.

The United States allows you to invest gold and other precious metals in precious metal IRAs that are commonly referred to as gold IRAs. Gold IRAs allow you to save money for retirement in the form of gold with tax benefits. Money saved in an IRA is saved before tax and only taxed when withdrawn for retirement. Precious metal IRAs are a better way to invest for retirement but you can always buy precious metals by themselves.

Most Experts recommend for the average investor 5 to 15% of your portfolio should contain precious metals. Some would even say that up to 30% of your portfolio should be precious metals.


Stocks are essentially buying part of a publically traded company. They have the potential to be very profitable when bought and sold at the right times. The problem is no one knows what those right times are. Companies can do really well for a while then go out of business. For example, there was a lot of speculation about Best Buy going out of business but all they did was close a few stores.

More and more often recently the United States stock market hits regular lows. Knowing these times and what to buy can guarantee you a large amount of retirement income. Stocks can’t be completely predicted by retirement savings calculators. They are more risky but if you want to turn money into even more money stocks help many people do that.

You also have the option to invest in foreign stocks. Foreign stocks take more research and keeping a good eye out on the market.

Real Estate

Some people invest in houses, apartment buildings, and/or business buildings in order to earn rent but also to have something to sell for retirement. When it comes time to retire they sell the buildings and make money on it. Real estate has the potential to significantly add to your income and your retirement savings but it can also be risky.

Real estate sales depend on the market. You need to hope that when it comes time to retire that it will be a seller’s market. You also have to keep up with the real estate by performing maintenance, keeping track of tenants, and worrying about damage. Real estate is very much an active retirement investment.


Calculate your baseline for retirement using a retirement income calculator but then plan for more. You want to make sure that you have what you need to live comfortably without jeopardizing the present. The above tips are just a few ways to help yourself out. And remember, unless 100% necessary for your health and safety never touch your retirement savings.


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