(Department of Labor)
Kudos to the U.S. Department of Labor, Employee
Benefits Security Administration for attempting to provide education on
retirement planning. This site contains an online calculator which follows the
booklet prepared by the DoL with the same name published in February, 2010.
Unfortunately, its focus is primarily on helping individuals who are about 10
years from retirement with their planning rather than helping retired
individuals determine a spending budget. Here is the link to the booklet
www.dol.gov/ebsa/pdf/nearretirement.pdf
The following are some of the features of the online tool that I found disappointing:
The following are some of the features of the online tool that I found disappointing:
After laboriously completing the many input
items, the spreadsheet compares the present value of future expected income with
the present value of future expected expenses. This is useful in determining an
overall shortfall or surplus, but it doesn't tell you how much you can spend
each year.
In determining the present value of future
expected income, Social Security amounts are not indexed with assumed
inflation. As far as I can tell, this is just an error in the program.
If you are over age 70, the program doesn't work
for you. I guess retirement planning is no longer a mystery after age 70.
The program uses an assumption for inflation of
3.5% per year for non-health expenses and 7% per year for health related
expenses with no flexibility to adjust those assumptions.
If you are currently retired and have a
fixed immediate annuity, the program does not allow you to input a fixed
deferred annuity. Also, there is no way to reflect a bequest motive, and the
retirement period is fixed in the program to end at age 95.
The program converts accumulated savings into
fixed (non-cpi indexed) payment amounts at retirement.
The booklet provides links to other online
savings calculators that are also primarily focused on pre-retirement savings
accumulation rather than post-retirement decumulation.
If you use this tool, don't use commas in your
input items as the program will reject them.
