Why you should tap the Power of the Internet for Retirement Planning
We have been wowed by the power of the Internet time and time again. The fact that you can shop, do banking transactions, and even socialize with friends online is enough to make you wonder what the Internet cannot do. The truth of the matter is that almost all transactions can be done with a few clicks of the mouse. This includes planning for your retirement.
Planning for your retirement is one of the most important things you can do today even if you are still 20 or 30 years away from it. The earlier you plan your retirement, the more comfortable it will be for you when the day actually comes since you will need to give your investments time to grow. But how do you figure out all the complicated calculations that you need to make in order to be able to determine how much money you need to live comfortably upon retirement? This is where the Internet comes in.
Here are the reasons why you should tap the power of the Internet when planning your retirement:
Many websites have online tutorials that help you plan for your retirement. If you don’t have a retirement plan in place, you can definitely brush up on the basic information about 401(k), 403(b), IRAs, Roth IRAs, Social Security benefits, and pension plans that you can find in various websites online. Even if you already have a retirement plan in place, you can brush up or deepen your existing knowledge to make wiser investing decisions and/or put more into your nest egg so you can better strategize for your retirement.
You can let online calculators do the complex calculations for you. If you don’t like math, retirement planning can be such a pain. This is because there are so many calculations to do. From determining how much you need in order to save now in order to retire comfortably to factoring in the effect of inflation in your investments, the Internet can help you will these complex calculations. These retirement calculators simply ask you for answers to some questions like your current age, desired retirement age, current income, and the income you wish to receive when you retire, among others. Many of these calculators can be used for free but the more sophisticated and comprehensive ones require monthly memberships.
Retirement calculators let you make adjustments to your investments. Online calculators allow you to recalculate to see what effect increasing your future annual contributions will have on your retirement. With this feature, you can input a higher amount into the box and be able to see how making these changes can impact your financial picture. Whenever your financial picture improves and you want to contribute more to your retirement, you can run the figures again in the retirement calculator to see the difference that it will make.
You can run “what if” scenarios online. “What if” scenarios are used to determine how you currently handle your money will impact your future. You can examine how eliminating restaurant dinners can affect your personal finances, for instance. Or on a much larger scale, you can calculate how spending for a grand trip around the world can foil your plans to retire early. The good thing about these retirement calculators is that they allow you to run various “what if” scenarios with a few keyboard strokes and a few mouse clicks.
You avoid fees for financial advisers. Okay, before we proceed with this, let’s get one thing clear: Information you find online should not be used as substitutes for the knowledge and personalized planning that you would get from a reputable financial adviser. This is for those who are really intent on charting their own path and have the time and patience to scour through the information found on the web, make their own investments, and plan their entire retirement themselves. Since you act as your own financial adviser, the tools and calculators found online will enable you to do that and save on the fees that you would otherwise have to pay to the professionals. Note, however, that this move can be pretty risky on your part so you have to do a thorough research before going this route.
Developing a Retirement Plan Using the Internet
Now that you know why you should tap the power of the Internet to plan for your retirement, the next step is to develop a plan for your retirement online. How do you do that?
First of all, you need to choose the best retirement calculator that will help you do the job. There are different kinds of calculators for various purposes (we will be giving some of the more popular ones in the next section) so you have a plethora of choices. Also, you can choose between free calculators and those that need to be bought or require a monthly fee. It goes without saying that those which are sold give more comprehensive calculations but for starters, you can always use the free ones.
Next, you will have to determine what expenses you will incur when you retire. This is a highly-personal decision since everyone has different standards of living. However, you can expect to allocate a huge chunk of money for food, medical care (this is one of the highest expenses incurred by senior citizens), housing, and car expenses (unless you’ve already paid off your mortgage or car loan). And while we would like to believe that we will finally be free from taxes in our golden years, the truth is far from such. You will still have to allocate a certain percentage of your income to pay the IRS.
Third, you need to determine how much you need to live on when you retire. Most experts agree that you might need around 80 percent of your current income to retire comfortably. However, if you intend to go on a cruise or travel the world, you might need more. There are websites that will help you focus on the expenses for retirement.
Fourth, you will have to factor in how much you have based on your retirement accounts, including your 401(k) or similar employer-sponsored plans, IRA, Roth IRA, savings accounts, and your Social Security benefits. There are online calculators that teach you about these retirement accounts and give you projections on how much your funds are going to be worth by the time you retire. There are also calculators that will help you determine when you can cash in on your Social Security benefits and how much you can expect to get from it. Based on these calculations, you will be able to adjust how much you can put into your retirement funds so that you will be able to live the kind of life you want in your golden years.
Finally, in the event that you don’t have an employer-sponsored plan or can’t qualify for an IRA, you can get an annuity. Essentially, this is an insurance product that pays out income to you in the future. Annuities can either be variable or fixed. A variable annuity will pay out income to you depending on how your chosen investments perform. A fixed annuity, meanwhile, pays you guaranteed rates of interest, allowing for a predictable income stream when you retire. However, annuities can be expensive so make sure that you do your research first before getting swayed by any insurance agent to hinge your retirement on them.
Helpful Websites for Retirement Planning
Here are the websites that you can check out to help you start planning your retirement. You can also do a Google search if you need more online tools.
Retirement Planning Guides: These websites provide a wealth of information and how to guides to help you plan for your retirement.
Retirement Calculators: These online calculators will help you determine how much money you need for your retirement.
Retirement Savings Calculators. These calculators will specifically help you determine how much you need to save to retire comfortably.
401(k) Savings Calculators. These allow you to determine how much income your 401(k) will give you during retirement.
Information about IRAs and Roth IRAs. These websites provide helpful information about Individual Retirement Accounts (IRAs) and Roth IRAs.
IRA Calculators. These online calculators will help calculate how much you need to put in your IRA and how much you can withdraw from it.
Life Expectancy Calculators. Allows you to calculate how long you can expect to live so you can plan your retirement accordingly.