Can we afford to retire?
"Mirror, mirror on the wall .."
Thinking about retirement, we usually think about our ideal retirement scenario. Previously, we documented our ideal retirement scenario and we built up the cost estimate. Now we want to check if we can afford it.
And to do that, let us try a retirement calculator. Or to be precise, search for a retirement calculator that suits us.
What suits us can differ from person to person. And it may change when we move from one stage of retirement planning to the next. But we have to start somewhere.
As we work more with our retirement calculator, we will form our preference. If the one we use no longer suits us, we can switch to a different retirement calculator.
Free retirement calculator
Go to our preferred search platform and type in "retirement calculator". We will find a lot of free web-based retirement calculators. Click around and explore the few that interest us.
Some are advertisers-supported and may come with the potential of them tracking us. Many financial institutions websites (e.g. banks, investment advisors) also have retirement calculators. These do not have third-party advertisements, but their websites may still have trackers. So you need to beware either way.
The basic functionalities are similar, but the layout can be very different. For illustration purpose, we will explore the retirement calculators from UBS and Vanguard. I am not affiliated to both of them; I merely appreciate their designs.
The calculator from UBS is great for those of us who prefer visuals. It is very simple to use but a bit limited for tweaking. They may intended it only as a starting point for more detailed planning with their advisors.
The calculator from Vanguard is like a story or a narrative. It allows us to input a lot of data for the calculation. And with all its flexibility, it is still simple enough to use for ourselves.
Go search for a retirement calculator that suits you. If you do not want to bother, try either one of the above. Or try both. The important part is that we get an estimate if we will have enough savings to afford our retirement.
We may also find that we may not know in detail how much savings or net wealth we have in total. For now, try with a rough estimate. I think a data-driven retirement plan is a living document. We should be able to revise it and improve it anytime we have better data.
Mind the data quality
The benefit of starting even with less than ideal data is that we will discover which data we need to improve. The more we improve our data and our process, the better we become and the better our planning will be.
The quest for improving our data quality may force us to change some of our data keeping habits. And for some who does not like to manage details, this can be intimidating. But as the adage goes, "garbage in, garbage out".
We cannot turn back time. It will be unpleasant to discover too late that we plan our retirement based on bad data. Therefore, we need to gather good data to input into our retirement calculator.
It is a journey
This is not a one-time process. We need to revise the estimate as often as we have newer or better data.
Let us recap.
We would have come up with our “ideal” retirement scenario and estimated the approximate cost.
We would have used a retirement calculator to check if we can afford that retirement scenario.
In future newsletter(s), we will discuss what we can do if we do not have enough.
Have a great day.
Disclaimer: Anything I share is not intended as financial advice; I am merely sharing personal opinions and experiences. The information is of general nature and you should only use it as a place to start your own research and you certainly should do your own due diligence. You ought to seek professional financial advice before making any decisions.
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