Full retirement age ranges from age 65 to 67 in the United States, at least according to the Social Security Administration. However, your financial ability and emotional preparedness may indicate that you're ready to retire sooner or later than that prescribed age. People who are starting to think about retirement need to balance emotions with facts and figures. Personalized visuals (such as charts and graphs) are a surprisingly effective way to make the connections you need.
Scientists estimate that we process visual information up to 60,000 times faster than we process text. Indeed, humans may be able to recognize images that we’ve seen for mere milliseconds. A great visual can transform overwhelming facts into bespoke insights about a retirement plan.
Using a retirement calculator to generate personalized charts can simplify the retirement planning process. These are a few of the most important charts to help you picture whether your retirement plan is on the right track.
Check your allocation
Typically, allocation charts are pie charts. They show what percentage of your investments are stocks, bonds, real estate, and other asset classes. Those charts are valuable. However, investment allocation means more than just the percentage of your money in stocks and the percentage in bonds.
In retirement planning, it is important to understand exactly where your money is and how accessible it is. The Retirement Budget Calculator uses “buckets” as the allocation image. Buckets guide users to think about the money needed for short and medium term goals. Money that isn’t needed in the next few years is in the long-term bucket. This bucket can be invested for more aggressive growth. By filling up “buckets” investors gain comfort with their investment allocation.
Look into your portfolio's future
During retirement, some people find it difficult to cease major earnings, and start spending down capital. Others may want to splurge early in retirement, only to find themselves in a financially vulnerable position later in life. A future view that shows how a retiree’s portfolio can expect to hold up in light of their current spending decisions.
A growing number of free and paid retirement calculators offer a general view of how your portfolio may perform in the future. Some include several lines to help users predict best and worst case scenarios.
Like all predictions of the future, The Retirement Budget Calculator's Future View isn't a crystal ball. It shouldn't be used to predict the value of your portfolio thirty years down the line. Instead, it's main function is to help retirees feel comfortable with how quickly or slowly their portfolio declines during retirement.
Chart out your expected longevity
People seeking a traditional retirement age are likely to have a few decades left on Earth, but their remaining years isn't infinite. We're eager to help people steward that valuable resource during those retirement years. Psalm 90:12 says, "Teach us to number our days, that we may grow a heart of wisdom."
The Retirement Budget Calculator includes a view of longevity or estimated time remaining to live. This isn't to be morbid. Instead, it is a reminder that each day is a gift, which can be enjoyed and which can be used to serve and love others. Retirement planning isn't mainly about dollars and sense. It is about stewarding your one life well.
When you're no longer working full time, there will be opportunities to live and serve in new ways. Take time to think through how you can use your unique gifts, and your newly reclaimed time to enjoy the world, and to serve others.
Picture your cash flow
Retirees expect to draw down from investments, but cash flow still matters. The Retirement Budget Calculator allows users to see how their spending during retirement compares to their secure income sources. This makes it easy to see whether a retiree is still saving, drawing down a bit, or relying too much on investments to cover expenses.
Retirement Budget Calculator's uses the Secure Income Score to help retirees understand their cash flow. Retirement budget calculator recommends that 80% of essential expenses should be covered by guaranteed income. Guaranteed income could include Social Security income, income from pensions, rental properties, and income from employment.
The Secure Income Score relies on a detailed look at a user's proposed spending, and their secure sources of income. However, the importance of this score isn't lost in Cell H87 of someone's personalized spreadsheet. It is displayed prominently on the Retirement Budget Calculator's personalized dashboard.
Envision a "safe" withdrawal ratio
A withdrawal ratio is the percentage of your investment portfolio that you take out to cover expenses each year. The withdrawal ratio drives the likelihood of your portfolio lasting as long as you. Retirees with a low withdrawal ratio can expect a portfolio to last a long time. Those with higher ratios may run out of money during retirement.
Many financial planners recommend a withdrawal of 4% of your portfolio the first year of retirement. After that, the withdrawal can be increased by the amount of inflation. The Retirement Budget Calculator allows users to calculate a withdrawal rate based on both their desired spending levels, and their guaranteed income sources.
If your spending indicates a withdrawal ratio below 4%, the Retirement Budget Calculator displays a "green" score for withdrawal rate.
When it comes to withdrawal rates, it is really easy to get into "fuzzy math" territory. If you "ball park" your income and your expenses, you may dramatically misestimate your withdrawal rate. Retirement Budget Calculator summarizes the expected withdrawal rate based on detailed inputs.
Best retirement calculators for finding visuals for your checklists
As you're preparing to retire, it is important to go through checklists. But it's also important to check how you feel about those numbers. Visuals are especially helpful for cutting through numeric mumbo jumbo and getting to the heart.
Unfortunately, most retirement calculators only offer one or two visuals. These tend to focus on net worth, or an annual or monthly spending number. However, a few tools set themselves apart as providing excellent visualizations for retirement planning. These are some of the best retirement calculators for visuals.
- MarketWatch’s Retirement Calculator. MarketWatch’s Retirement Planning Calculator is a free tool that offers three powerful images for users. The detailed retirement spending view shows how your spending is likely to change during retirement. The future income view shows how much income you may expect from pensions, social security, and similar guaranteed sources. Finally, the asset graph shows accumulation and draw down compared to your age. Overall, the images are very strong, and can help DIY retirement planners understand some critical concepts. However, the general user interface can be buggy and difficult to fill out.
- Personal Capital. Personal Capital is another free tool for net worth tracking, and monthly budgeting. It also allows users to track their asset allocation in a detailed view. The tools retirement planning view shows projections of portfolio balances over time. It also offers insights into how your portfolio may have performed in past recessions. Overall, Personal Capital covers many of the major visual categories. But users must connect the tool to their investment accounts to get insights from the tool.
- Retirement Budget Calculator. The Retirement Budget Calculator designs all of it’s visuals from a spending perspective. Because users enter detailed information about their spending, Retirement Budget Calculator can serve up meaningful graphs about cash flow, portfolio size and more. The main dashboard also serves up visuals that show key metrics (such as percent of expenses covered by income), and asset allocation (using the bucket method). Users can see how changes to spending, income, or withdrawal amounts can affect every part of their financial plan. Retirement Budget Calculator is a paid tool.
