Can You Trust Retirement Calculators?        

by Steve Vernon, FSA

I frequently recommend that people use an online retirement calculator to help them determine how much to save for retirement. To test my own advice, I decided to check out several, free retirement calculators that are readily available on the Internet to get a feel for the user experience.

The results of my review show why many people might end up confused by these tools. Some of the calculators weren't very user-friendly, and some asked for input on assumptions that only economists and actuaries can answer (and even the experts can only provide educated guesses at best). Most important, the amounts the calculators came up with as to what you'd need to save for a secure retirement varied widely.

With so much to cover on this topic, I wrote four posts that reported on the results of my review and offered suggestions about how you can reduce calculator confusion.

My first post showed the wide range of contribution amounts that several different calculators suggested for a hypothetical couple, while my second post provided in-depth results about each calculator and identified two of my favorites. The third post offered some tips on how best to select and use a retirement calculator that fits your needs. The fourth and final post coaches you on how to answer a few common questions that retirement calculators ask to help estimate how much you should save for retirement.

I know that reading four posts sounds like a lot of work -- but it sure beats being wrong and broke at age 80! It's well worth the effort to do the job right.

Please continue reading for this month's selections of helpful blog posts and articles on retirement.

The Clash of the Cultures: Investment vs. Speculation is investing pioneer John C. Bogle's tenth and most recent book. It's an enjoyable read that ends with 10 lessons for investors that, while simple, are deeply valuable to the general public. Read this excellent summary of the book from fellow CBS MoneyWatch blogger Allan Roth.

Create a Do-It-Yourself Pension

As baby boomers glide toward their retirement years, many are focused on the need to generate a reliable retirement income that's protected from stock market volatility. Many people wish they had a company pension, where you're paid a monthly retirement income for the rest of your life, no matter how long you live and what happens in the economy.

But without a pension, you can still make your wish come true with a simple fixed annuity, a product that's been available for years from insurance companies. Read here for details on one way you can create your own pension.

Should you consider buying an annuity? You'll hear lots of passionate opinions on both sides of this debate, each with valid points. Read here to cut through some of the confusion to help you decide if an annuity might be a good investment for you.

If you're one of those lucky people who'll receive a lifetime monthly income from your employer's defined benefit pension plan, you have an important decision to make when you retire: Do you choose a pension that continues the monthly income to your spouse after you die by selecting a "joint and survivor" annuity, or do you elect a higher monthly paycheck by choosing a "life only" annuity that stops after your death?

In my previous "just tell me what to do" series of posts, I advised that people who are married or in a committed relationship should elect a joint-and-survivor annuity to provide a secure income to the spouse or partner should the pension recipient die first. I cautioned against schemes from insurance agents who urge you to elect a life-only annuity and instead buy life insurance to protect your spouse.  

Then I received an email from another reader -- let's call him Bill to protect his privacy -- who's approaching retirement and who'd been pitched such a scheme by an insurance agent. The agent assured Bill that the life insurance would provide a better retirement income for his wife after his death than the joint-and-survivor annuity under the pension plan. Read here to see my analysis of whether the life insurance is a worthwhile election for Bill.

Timothy Noonan and Matt Smith are financial professionals with more than five decades of combined experience working in the asset management business. They've written an excellent book, Someday Rich, that takes an atypical approach to the issue of financial security. Though the book is written for financial advisors, most investors can learn a great deal from their work. Read this excellent summary of their book from fellow CBS MoneyWatch blogger Larry Swedroe.

Is a Health Savings Account Right for You?   

Fall is the time when most employers roll out changes to their benefit plans and workers are required to make their choices for the upcoming year. Employers are again stepping up their efforts to offer their employees more plans that allow them to get more involved in their health care choices. Read this excellent post from fellow CBS MoneyWatch blogger Ray Martin to learn more about Health Savings Accounts and high-deductible health plans.