Retirement Planning Begins with Numerical Projections
planning begins with numerical projections. It is never too late to
begin planning and saving for
retirement. Government pensions or Social Security may only supply 40%
of your desired retirement income. You will need additional
income from other investments to fill the gap, and since Americans are
living longer these days, the most prudent
approach is to begin providing for those future needs now.
Investment tutorials abound for stock, commodity or currency
trading. Planning starts with a simple assessment of where you
are today from a financial perspective and where you want to be when
you retire. These calculators can assist you with these initial
The objective here
is to obtain an estimate of your total earnings potential over the
remaining years that you plan to work.
Step 1: Enter your current age
Step 2: Enter the age that you plan to retire
Step 3: Enter your current annual income
Step 4: Estimate your potential annual raise as a “%”. For
a long-term estimate, this figure should be in the 2% to 6% range,
unless you expect advancement potential in your future.
For the example shown, $3.5 million is the projection. A good
rule-of-thumb for long-term savings should range from 5% to 10% of this
figure. Save your estimate for later.
Net Worth Calculator
Your objective here is to obtain an assessment
of your current financial position.
“Net Worth” is a financial term that equates to the difference of your
current assets less your current liabilities. Your Net Worth
represents the amount of initial savings that could be put to work for
your long-term investment goals. In this case, there are three
tabs, one for each “Step”, which require your attention and
completion. The number displayed at the top of the calculator
will be used in the last calculator.
Step 1: Assets – Enter the current values of any of your assets
as shown: Real Estate, Personal Property, Investments and Cash
Step 2: Liabilities – Enter the principal balance of your
mortgage, if you have one, and the total value of your other
outstanding debt, including car loans, credit cards or any other loan
Step 3: Growth – This section is purely hypothetical to
illustrate how important your current financial position is. You
can vary the growth rates for both your assets and liabilities to see
the impact over ten years. The lesson you will learn is that the
high cost of debt will eat into your savings plan unless you decide to
pay them off as soon as possible. Mortgage loans are long-term
and should be estimated, but credit card and auto loans should be
liquidated when possible.
The value calculated for your Net Worth should be carried forward to
the next indicator.
Savings Goal Calculator
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The objective of this final calculator is to give you an approximate
idea of how much you must save on a monthly basis to realize your long-term savings goal. After
entering your key assumptions, you may then vary the amount you save
monthly to see how long your plan will take to arrive at the desired
Savings Goal. The calculator will let you know if your “plan” is
unrealistic. In that case, you must change a variable in order to
get valid results. Your desire should be to arrive at your
Savings Goal at the same time as you plan to retire.
Step 1: Enter a percentage of the amount calculated in the
“Lifetime Earnings Calculator” as your “Savings Goal”. A percent
between 5% and 10% is appropriate.
Step 2: Enter the same percentage of your current income in the
“Save Monthly” box
Step 3: Enter a “Rate of Return” – 7% is a good place to start
Step 4: Enter an “Inflation Rate” – long-term rates tend to be
between 2.5% and 3.5%
Step 5: Enter the Net Worth figure calculated in the previous
calculator in the “Currently Saved” box.
Press the “Submit” button, and your answer will appear in “red” at the
top of the calculator. Try different assumptions and enjoy seeing
how easy the calculators do the difficult math computations for you.
Congratulations! You have taken your first step in financial planning for
your future security and wellbeing!
Good Luck with your retirement savings plan!
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