Why you shouldn’t rely on a retirement calculator

Why you shouldn’t rely on a retirement calculator

In today’s environment, we all try to find quick, on-demand answers and advice to our questions. We ask Siri, Alexa, or Google just about everything.

I recently read that the top four “how to” searches on Google were: (1) how to lose weight, (2) how to tie a tie, (3) how to get pregnant and (4) how to make money.  I think we can all agree that it’s at least a little worrisome that we have to ask Google some of these questions but what it shows to me more than anything is that we are increasingly looking for quick and general advice in many facets of our lives. And no doubt, quick and general advice works great for some things such as how tying a tie.

However, whether it’s advisable to take the same approach to planning for retirement is another issue. I’d argue that it’s way too important and personal to do so.

Imagine the hypothetical scenario in which you and your neighbor, of the same age, are currently in the same financial situation (i.e., you currently earn and spend similar amounts annually and have diligently accumulated a comparably-sized nest egg) and you both want to retire in the same year. Do you think that the same financial plan makes sense for both of you?

I contend, that just because some (albeit very important) numbers line up, it doesn’t mean that the same plan is appropriate for both of you. This is in large part because the above similarities give no mention to yours or your neighbor’s goals, which may be quite different.

My wife and I are a perfect example of why we needed more than just a calculator—yes, even we did. If we were separately asked to describe an ideal next 10 years, our answers would be slightly different. I would want to spend as much time as possible taking quick family trips to ski in the winter and hike, bike, or take lake trips in the summer and take longer family trips like a RV trip across the US and week long trips to Europe, Australia, and South America. She, on the other hand, would definitely NOT want to ski (hates the cold) and NOT do an RV trip but would love to own a lake house, take trips to Europe and Australia.

It takes a lot of conversations and on going goal assessments for us to decide how best to save our money and spend it. Do you think that a financial calculator can handle these variables? Can it put emphasis on which are joint goals and higher priority? How about balancing what short-term needs there are versus long-term spending needs.

I’ve recently tested four different retirement calculators that I found by searching “retirement calculator” on Google, and received four very different answers as to how much I need to be saving for retirement. I gave the same responses to each of the calculator’s questions and yet they all came back with different estimates of what I’d need in retirement. Why? It’s because they each used different general assumptions for my needs, earnings increases, inflation, and taxes.  How different were they? Estimates varied on how much I need to have saved by over 75%.

How can I plan on saving if I don’t have a good estimate that is customized towards my goals?  I can’t. 

While these calculators quite often provide OK estimates, they should never be exclusively relied upon to plan for your financial goals.

That’s what real financial advisors do. That’s what we do.

We’d love to talk to you about your goals and financial situation.


Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Private Advisor Group, a Registered Investment Advisor. Private Advisor Group and Kathmere Capital Management are separate entities from LPL Financial.


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