online retirement calculators

Free online retirement calculators are a dime a dozen these days, and a recent study seems to indicate that this may well be an area in life where you get what you pay for.

A recent paper from Barry S. Mulholland, assistant professor, Dept. of Personal Financial Planning, Texas Tech University, suggests that many of these online calculators are offering misleading advice and should only ever be used with upmost of caution.

The study also suggest that many of these tools offer a level of analysis that is not very accurate, in terms of what an individual needs to enjoy a secure retired life.

For the study, Professor Mulholland and his colleagues compared the advice given by professional adviser software with that which was given freely by over 36 of the most commonly-used online retirement calculators found on the internet.

And the results where startling.

Professor Mulholland wrote, “Only 30 percent of the online tools suggested the clients needed to save more — the other 70 percent gave inaccurate advice by suggesting the family was on track for their retirement goals or gave an answer that wasn't clear on what they needed to do.”

“But even the 30 per cent of tools that suggested more savings gave wildly different answers, so some of those may not be very useful.”

Professor Mulholland’s paper suggests that part of what makes the advice offered by these online retirement calculators so misleading is the fact that even at the best of times they’re generally drawing from a limited amount of information.

Professor Mulholland suggests that if you are going to use an online retirement calculator, make sure it’s one that takes the following aspects into account:

  • Age
  • Income
  • Assets
  • Rates
  • Household structure

Mulholland suggests in preparation of retirement it’s important to seek professional advice, and, “Keep reassessing on a regular basis... what you need to save for retirement and make the appropriate adjustments over time to successfully meet your retirement goals.”

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