There are a lot of retirement calculators out there that tell you how much you need to save given your spending goals, or how much you can spend per year given your nest egg. I’ve looked at a bunch and learned that the best retirement calculators are rarely the ones provided by your financial institution.
Here are the retirement calculators that I think are the best, and the ones that are disappointing. (Note: see disclaimer below.)
The best retirement calculator: FI Calc (and it’s free!)
I believe the best free retirement calculator is FI Calc. What’s so great about it?
- Uses past performance to gauge probability of success. Many free calculators are highly simplistic, assuming that investments will simply rise gradually at some arbitrary percentage over decades. FI Calc, however, uses scenarios from the last 100 years of investment returns to estimate your results. These statistics can show the downsides of “sequence of returns” risk — that is, the danger that poor performance in the early years of retirement could tank your overall results.
- Supports a variety of future cash flows. Most of us are not living on one lump sum of money, nor are we spending the same amount from year to year. We may have Social Security, pensions, home sales, inheritances, health expenses, or large purchases that will have a big impact on future income and expenses. FI Calc can handle a seemingly unlimited number of these in its estimates, and you can adjust these cash flows for inflation (like Social Security) or leave them to deflate due to inflation (like most pension and annuity payouts).
- Handles any retirement timeframe. Most standard retirement calculators assume that you’re going to retire at 65, live for 30 years and then drop dead. With FI Calc, both late retirees and FIRE devotees can set their ideal duration and get meaningful results.
- Lets you test different withdrawal strategies. Want to pull the same amount every year? FI Calc can handle that. Want to pull a certain percentage of the portfolio? No problem. Want to use guardrails? Easy. These and many other withdrawal strategies are supported, and it will warn you if your annual spending is likely to be highly diminished or highly volatile based your chosen withdrawal strategy.
- You can save your results. FI Calc lets you save your scenario as a link which you can revisit as often as you like, so you don’t have to re-enter all your data each time.
What are the weaknesses of FI Calc?
- Not so intuitive. After putting in your data, it’s not clear what you should do first. (In my opinion, you should start by looking for a fixed withdrawal amount that gets you to an 85% to 90% Success Rate — that is, the probability that you won’t run out of money by the end of retirement.) The interface just doesn’t make this obvious.
- No optimization tools. Using the same data you give to FI Calc, the tool could easily tell you what fixed withdrawal percentage will achieve a given probability of success, or even what asset allocation would maximize your chance of success. (If you do want this data, you can try FIRECalc below.)
- Ignores taxes & RMDs. FI Calc doesn’t ask for the account location of your savings, so it can’t estimate required minimum distributions or taxes. Without this information, it can’t tell you if Roth conversions would help either.
Other interesting retirement calculators
FIRECalc
FIRECalc is a janky older brother of FiCalc, having been in existence since 2000. Like FiCalc, it’s free and it uses historical data to estimate results. What’s nice is that it also features optimization tools to calculate an ideal fixed withdrawal strategy and asset allocation. But it isn’t as pretty or as easy to use as FiCalc and its interface is peculiar, to say the least.
cFireSim
cFireSim is a good free tool that uses probability-based “Monte Carlo” simulations instead of historical data. I feel that Monte Carlo simulations are weaker than history-based estimates, since they often generate unrealistically optimistic and pessimistic scenarios. But this tool gives results that are pretty similar to most other calculators, so I feel its settings are fairly good.
Bogleheads’ Variable Percentage Withdrawal Tool
If you have the flexibility to increase or decrease retirement spend A LOT, or you just want to “Die with Zero,” you should take a look at the Bogleheads’ free Variable Percentage Withdrawal spreadsheet (which employs Google Docs). The VPW calculator will help you spend more of your portfolio earlier, recommending withdrawal amounts on an annual (or quarterly, or even monthly!) basis to keep your spending in line with your portfolio. It will encourage very aggressive use of your portfolio, but that isn’t necessarily a bad thing — most of us greatly reduce retirement spending by our 80s. (Note that you can model the VPW spending strategy in FI Calc as well, but FI Calc does not make it at all clear what you are supposed to withdraw in any particular month.)
Fidelity Retirement Analysis Tool
If you have a Fidelity account, you have access to their Retirement Analysis tool. (This tool is based on eMoney, a software app used by non-Fidelity financial planners.) The good part is that the tool can take into account all your different accounts and so estimate your future taxes and RMDs. Unfortunately, it really only has 3 scenarios that you are testing, and the pessimistic scenarios are extremely pessimistic, assuming a major stock market collapse just after you retire. It’s a useful input, but it will likely cause you to greatly underspend in retirement.
Optimal Retirement Planner
Update: Optimal Retirement Planner is dead, possibly for good, but I’m leaving this link in case it spontaneously resurrects itself. Optimal Retirement Planner was an interesting tool that not only calculated out how to optimize your fixed withdrawal strategy, it even told you which accounts to tap for optimal tax treatment, and even could recommend a variety of Roth conversion strategies to avoid RMDs.
NewRetirement: A Major Missed Opportunity
NewRetirement is one of the leading paid tools for retirement planning. It’s easy to use, can ingest information live from your accounts, and can project your income, RMDs, and taxes by year. I’ve spent a lot of time testing it out, but unfortunately, I have come away less than impressed, due to two major, fundamental problems:
- Its financial projections rely on user inputs, and it’s not possible to figure out how to do them right. Unlike most other calculators, NewRetirement doesn’t use historical data for its projections, nor does it use a legitimate Monte Carlo simulation. Rather it bases its projections on data that must be input by the user, and there’s really no good way to know how to input that data in a way that is historically accurate. (Ideally, you’d input an average and standard deviation for different asset classes, and then tell the tool what asset classes you have. Instead, the user is told to input optimistic and pessimistic scenarios for each account — which come from where? Based on what?) I feel like they really cut corners here, and I find that the model’s results really make no sense, being highly skewed too high or too low — or both!
- Its optimization tools don’t appear to discount future cash flows. This is technical but significant: the tool appears to value current dollars like future dollars. This makes no sense and means that the Roth conversion estimation tool just doesn’t work correctly. (Ideally, the Roth conversion tool should maximize the net present value of your after-tax withdrawals. Whatever it’s doing, it’s not that.)
These two problems are so fundamental that I can’t even figure out HOW to make NewRetirement work the way it should. So for now, I can’t recommend it for projecting a reasonable retirement spending plan.
Retirement Calculators to Ignore or Avoid
I don’t recommend relying on any of the following calculators. They are all free and easy to use, so there is no harm in playing with them, but they all have defects, some of which are significant. Buy I’m hoping that if I post about them, then maybe, just maybe, I will shame then into improving them.
- The Vanguard Retirement Income calculator is really misleading, assuming (1) that a 4% withdrawal rate will always work and (2) that you will take Social Security at 62 (which is usually a bad idea unless you expect to die early). The calculator makes no provision for people planning anything but a standard 30 year retirement; those planning for 20 years or 40 years are out of luck. The calculator also has a major bug: changing your expected rate of return has no impact on your projected retirement income. (Vanguard used to have a good Monte Carlo-based asset allocation tool, but it has since disappeared from their site.)
- The Schwab retirement calculator is quite basic, with very limited asset allocation inputs.
- The Nerdwallet retirement calculator has the same weaknesses as Vanguard’s.
- The T Rowe Price Retirement Calculator is laughably simplistic. It nominally uses Monte Carlo simulation, but does nothing to explain how it even comes to its conclusions on the right spend level. It also appears to make assumptions about your Social Security, but doesn’t even explain what they are. The only good(?) thing is that it is extremely conservative, so it will tell you to greatly underspend in retirement. Better than overspending, I guess? ¯\_(ツ)_/¯
- The AARP Retirement Nest Egg calculator is simply a canned, third-party calculator from a random site called Dinkytown, and it is not very good. It’s quite simplistic, not even giving you the option to say at what age you plan to take Social Security. Unfortunately Bankrate and several other nominally objective financial information sites use this exact same calculator too.
- The Ultimate Retirement Calculator assumes you magically have year-over-year straight line growth throughout your whole retirement, which is completely unrealistic and way too optimistic. The same problem applies to Investomatica’s Early Retirement Calculator.
- The SmartAsset retirement calculator just doesn’t make sense. Tiny changes in assumptions (like annual retirement expenses) have enormous impact on post-tax income projections, and since the tool doesn’t share its annual results estimates, it seems to veer between ridiculously optimistic and overly pessimistic without explanation. It won’t let you assume you retire prior to the age of 55, so no good for FIRE types. Finally, it lets you choose a Social Security election date after 70, which never makes sense, and it makes unmodifiable assumptions about what your Social Security will be (and they tend to be low).
It’s rather disappointing that the leading association for retired people and three major retail investment brokerages have such poor retirement calculators. No wonder most older Americans have no retirement savings, and those that do have lamentably little. According to Vanguard, the average American over 65 has only $232,000 in savings. Using the classic 4% rule and excluding the effect of Social Security, this is only enough money to generate $9,300 per year over the course of a 30-year retirement.
Conclusion: Try FI Calc and a few others
In summary, no one retirement calculator is good for every investor, but FI Calc is a great way to start. I’d try a few others as well as see how they agree or disagree.
Feel free to comment if you have questions!
DISCLAIMER: I am not a financial advisor and this article is not financial, legal or tax advice. This article is for educational and entertainment purposes only. All investing involves risk and your investment and other financial decisions are solely your responsibility. Past performance does not assure future results. You should do your own research and seek independent professional advice for guidance for your own personal circumstances. I am not affiliated with any of the companies or products listed, nor do I earn any compensation for the links contained here.