Are you on track for retirement?
Planning for retirement is one of the toughest financial tasks anyone can attempt. Nobody has a magic crystal ball that sees 10, 20, 30, or more years in the future. A trusted financial adviser can help for a fee. Fortunately, there are retirement calculators on the web that you can use for free, some very good:
- For federal workers, the Office of Personnel Management has set up the Federal Ballpark E$timate, which claims to give you, well, a ballpark estimate of how much you need to save for retirement. Unfortunately, I found this calculator to be complete broken, underestimating retirement income by at least 50% in some cases. Even though the program has places to enter your TSP contribution as a dollar amount or a percentage of your income, it appears to ignore the dollar amount. It also fails to report your TSP annuity amount in current dollars, only reporting it in inflated future dollars, making it hard to understand exact how much the annuity is actually worth.
- A much better service is Financial Engines, a company set up by a Stanford University professor, Bill Sharpe, who won the Nobel Prize in Economics. It’s free, relatively easy to use, and it understands federal retirement plans as well as non-federal plans. Better yet, it uses historical information to estimate best and worst case retirements instead of making you guess at the unknown. You can also vary your contributions, time to retirement, etc. to create the retirement you want.
