Before You Use a Retirement Calculator, Answer These 9 Questions

If you’ve ever Googled “retirement calculator,” you’re definitely not alone. It’s natural to want a number that tells you, Yes, you’re on track or Here’s how much you still need to save. And retirement calculators can be a really helpful place to start.

But retirement is about so much more than reaching a certain balance in your 401(k). It’s about what you want your days to look like, how you’ll create income once the paychecks stop, what you’ll spend, how taxes and healthcare fit in, and how prepared you are when life inevitably looks a little different than the assumptions in a calculator. So before getting too focused on finding your “retirement number,” here are nine questions worth thinking about.

1. What do I actually want retirement to look like?
   Before worrying about a retirement “number,” think about the life you’re planning for. When would you love to retire? Do you want to travel? Spend more time with family? Move somewhere new? Work because you want to, not because you have to? The clearer the picture, the easier it is to figure out what it might cost.

2. How much will I actually spend?
   You’ve probably heard that you’ll need a certain percentage of your current income in retirement, but everyone’s life is different. Start with what you spend today, then think about what might go away, what might increase, and what you’d like to have more room for. And don’t forget the not-so-fun things like home repairs, insurance and taxes.

3. Where will my retirement income come from?
   Your 401(k) balance is only one piece of the puzzle. Social Security, pensions, IRAs, investment accounts, cash, real estate and other income can all play a role. It helps to put everything on the table and see how the pieces work together.

4. When should I take Social Security?
   This is one of those decisions where there isn’t one “right” age for everyone. When you claim can have a meaningful impact on your monthly benefit, so it’s worth looking at Social Security as part of your overall retirement strategy rather than making the decision in a vacuum.

5. How will I pay for healthcare?
   If you’re hoping to retire before Medicare, this can be a big one. What will health insurance cost during those years? Even after Medicare begins, you’ll still want to plan for premiums, out-of-pocket expenses and the possibility of needing more care later in life.

6. How much of my savings is actually mine to spend?
   Two people can both have $2 million saved and be in very different situations. Money in a traditional IRA or 401(k), a Roth account and a regular investment account can all be taxed differently. Where you’ve saved your money can matter almost as much as how much you’ve saved.

7. How am I going to turn my savings into a paycheck?
   You’ve spent your career putting money into your accounts. Retirement means figuring out how to take money out. Which accounts should you use first? How much can you comfortably withdraw? How can you be thoughtful about taxes along the way? Having a plan for this can make retirement feel much more tangible.

8. What happens if the market doesn’t cooperate?
   Retiring right before a market downturn is very different from retiring at the beginning of a long bull market. You can’t control what the market does, but you can build a plan that considers the possibility that your first few years of retirement may not go exactly as hoped.

9. What happens when life doesn’t follow the calculator?
   Because it probably won’t. You might live longer than expected. Inflation could be higher. You may decide to retire earlier, help your kids financially, take the big family trip or buy the lake house you’ve always talked about. A good retirement plan should have enough flexibility to change when your life does.

The question isn’t only, “How much do I need to retire?”

It’s also: “What do I want my money to make possible for the rest of my life?”

A retirement calculator can be a helpful place to start. But it can’t know your family, your priorities, what keeps you up at night or what you’re really looking forward to. That’s where the planning becomes personal!

Leah