As American workers began to shoulder more of the responsibility for funding their own retirement, retirement calculators proliferated across the internet. A Google search for “online retirement calculator” garners tens of thousands of hits. People are anxious about their retirement readiness, concerned about whether they will have enough money to last through their lifetime.

A retirement calculator can be a useful tool to steer you in the right direction, but some can easily throw you off track. A good retirement calculator enables you to model your retirement plan by inputting several variables that can impact your income sufficiency so you can save accordingly. The following free online retirement calculators do the best overall job of translating sophisticated retirement income planning methods into an understandable and easy-to-use layperson’s planning tool.

T. Rowe Price Retirement Income Calculator

The T. Rowe Price Retirement Income Calculator has been universally lauded for its strong emphasis on income planning, enabling you to project your monthly retirement income based on different planning scenarios. For each scenario, it projects your monthly shortfall, if any, and shows the likelihood of your savings lasting throughout your retirement. It then offers options for making up potential shortfalls. You can compare scenarios side by side while changing the variables and assumptions. It also has a built-in Monte Carlo simulation tool to help you model different investments against various market conditions. The one negative is it only calculates for one retirement age; if you and your spouse plan to retire at different times, you need to run two separate calculations.

For the level of sophistication this tool employs, the presentation is very easy to understand. The interview process is somewhat involved, but there is plenty of pop-up support along the way. You can expect to spend up to 20 minutes inputting data if you have all of your financial information at hand.

ESPlannerBASIC

If you look at a lot of retirement calculators, most do not allow for varying tax consequences of different sources of income. This can have a significant impact on projecting your retirement income. The ESPlannerBASIC calculator allows for variable taxation that can help you work toward greater tax efficiency with your retirement income. (For further reading, see: Tax Planning: Why You Shouldn't Retire Without Doing It.) It also allows for spouses to plan for two different retirement dates.

The first thing you may notice when using the ESPlannerBASIC calculator is the detail of the input screens. The added detail allows for greater flexibility in using planning assumptions. It requires some upfront reading to understand the process. You can choose from several different planning modes, such as Conventional or Economics, which are both free. It offers two other modes, Upside Investing, and Monte Carlo, which are added purchases. A self-help guide can be accessed by clicking on any underlined word.

Some of ESPlannerBASIC's best features include:

  • Separate inputs for the assets of each member of a couple;
  • Assigning a different tax status to each asset, such as after-tax, pre-tax, no-tax, etc.;
  • Calculating income taxes automatically based on your inputs; and
  • Allowing for variable inputs of expenses and income to account for temporary situations or anticipated changes in the future, such as downsizing, sale of business, inheritance, paying for college, etc.

Once all the assumptions and variables are finalized, the output is generated with a simple click. You may find the detailed output a little difficult to understand at first, but it provides several pages of numbers and graphs that begin to clarify themselves. The only real negative is you have to assume age 100 for life expectancy, and you cannot specify the payout type for a pension, such as single life, joint life, etc. Also, if you are not inclined to spend a lot of time reading and combing through financial details, ESPlannerBASIC may not be for you.

The Bottom Line

Online retirement calculators are good for determining how much you need to save to provide sustainable income for your lifetime, and the T. Rowe Price Retirement Income Calculator and ESPlannerBASIC are two of the best free tools. It is important to keep in mind that retirement calculators rely on accurate information and realistic assumptions. In other words, if you put garbage in, you get garbage out. Before using any planning calculator, have all of your financial and benefits information on hand, and spend some time determining your retirement objectives and goals.