A pension calculator is a specific tool that provides a practical estimate of your pension after retirement based on various factors. These include details about your income and expenses and the remaining number of years in your work-life.
This calculator can set a target amount and track your progress. But even if you have never planned about your post-retirement life, it’ll give you a great perspective on your income and financial condition in those times.
There are specific calculators for specific countries that incorporate local interest rates and laws. There are free-flowing ones where you can manually put every piece of data to work it on a particular formula.
But whatever you choose, it saves you the hassles from long calculations and up-to-date knowledge about investment policies and various limits and regulations.
Through the pension calculator, you can determine how much money you would need to get a specific amount of pension that you think will be enough for a comfortable life. And when you know exactly how much you’ll need, you can plan better and opt for an appropriate pension plan to invest in to fulfill your target.
As they say, better late than never. You’ll You’ll never try to fix the problem if you don’t know the problem.
But the pension needed or desired is different for every individual. Some good parameters to determine a good pension amount are:
- Add up all the big investments and traveling costs you’ve planned after retirement.
- The number of dependents you have.
- Increasing medical expenses in your old age.
- The amount of money you’ve already saved.
- The number of years you still have till your retirement.
- The potential and probability of increasing or decreasing the contributions to your pension plan.
- The rate of growth in your investments and the expected total sum.
You can’t put an exact number on many of these things, so you need to make up an estimate and then add it to your expected pension amount. The pension should not only provide an adequate lifestyle, it must have a margin for unexpected events too.
After you plan all these things, use a pension calculator to track your path to the desired pension income. You’ll know where you stand and how much more you need in total. Fiddle a bit with the calculator, increase your contributions, and observe how it impacts your pension amount.
Every pension calculator makes several assumptions. So, you should first read about them. But, unfortunately, most of them take a few things for granted, like:
- Fixed increase in your contributions every year.
- Fixed return on investment rate.
- Fixed annuity rate.
- Post-retirement mortality.
- A fixed percentage of pension for the spouse after the death of the pensioner.
- Existing pension plan benefits.
- Fixed tax relief.
- Fixed annual management charge.
- Fixed contribution charge.
There are various benefits of using a pension calculator, such as:
A pension calculator’s best benefit is the ability to guide you to your perfect pension plan. First, you’ll know how much you need to save for a cozy environment. You’ll know if your current plan is falling short of your expectation and by how much. Finally, you can correct all the shortcomings afterward.
If you have an existing pension plan, the calculator can provide you clarity on how much you’ll get if you don’t change a thing. This clarity on your current situation will help you plan for your future in a better way.
You can put details about different pension plans to see which plan offers the most amount of pension after retirement. This will make selecting your pension plan easy peasy, and you’re guaranteed to get the best of the best.
- The pension calculator is designed as a layman’s tool. You don’t need to learn high-level math, nor do you need to learn complex laws and economic concepts and terms. You need just to enter some simple data, and you’ll be returned simple numbers about your pension.
How does it work?
Just go to any pension calculator website that works for your country. For example, if you’re in Ireland, use an irish pension calculator. Enter simple details that include:
- Your current age.
- Your current salary per annum.
- Age of retirement.
- Desired pension amount.
- Details about your current pension plan, like current total value, your contribution per month, and contribution from your employer per month (if any).
Start the calculation, and in a few seconds, you’ll get every detail you want, such as your pension in the current state of investment, the shortfall you still need to fill in, etc.
CONCLUSION
Pension is a hugely significant part of your future and your family as well. So, you should plan it once and for all to have the best post-retirement life you deserve in your golden years.
