What to look for in a retirement calculator


By The Human Interest Team

Key Takeaways

  • While there are countless retirement calculators, not all tools are the same

  • The best tools account for intuitive design and are detailed in their methods and assumptions

  • Here’s what you should consider when looking for retirement planning tools

Today, most working adults must carry the weight of their personal retirement planning. That’s why it helps to have reliable tools and calculators to help with the heavy lifting. As a Google search confirms, many financial institutions offer a tool to help you calculate your financial preparedness for retirement. But not all tools are created equally, so which one should you trust?

How the best retirement calculators can help you budget

The best retirement tools allow users to simulate different situations. They provide intuitive, accessible features that account for specific scenarios. And they explain their methods and assumptions in detail, ideally giving you the flexibility to match them to your situation. Below, we’ll review which characteristics provide a best-in-class experience. Here’s what you should consider as you’re using online tools to plan for retirement.

What makes a useful retirement calculator?

There are four key ingredients:

1. The calculator’s user experience

User experience (UX) is the process of creating meaningful, relevant products. From design and branding to usability and functionality, UX is a cornerstone of the digital experience. But because there’s no simple definition, a “good” user experience is often based on context. It encompasses visual design, information architecture, usability, and more. UX should consider the experience of all users. This means providing an accessible product that helps different people accomplish the shared goal of planning for retirement.

For example, you can adjust the NerdWallet Retirement Calculator in real-time to update your age, pre-tax income, current savings, and monthly savings. And the Vanguard Retirement Income Calculator has a functional interface that allows you to fill in the blanks. As these two examples illustrate, good UX design emphasizes simplicity and ease of use and empowers users to use a tool at their convenience.

2. The calculator’s user interface design 

While UX design focuses on usability and accessibility, user interface (UI) design centers on the function of a product’s interface. UI is the human-computer interaction that guides users to their desired outcome. The best tools have intuitive interfaces that minimize cognitive load, including:

  • Adjustable input controls

  • Clear navigational components

  • Information elements that guide a user through their journey

The Bankrate Retirement Calculator is a simple, if not dated, tool that uses an interactive range slider system. What the tool lacks in visual design, however, it makes up for in ease-of-use. For example, an interactive question box feature provides definitions of key terms. You can easily compare your current savings versus their total expenses—and you’re provided a prediction of when your savings will run out.

3. The calculator’s explanation of methods

When it comes to money, transparency is everything. Making decisions about retirement can be overwhelming. It should be the goal of any calculator to describe the path it uses to get you to retirement. Retirement investment strategies should not be one-size-fits-all. You deserve a tool that takes your personal situation into consideration. And the best tools explain how they’re calculating their predictions.

For example, the T. Rowe Price Retirement Income Calculator and Charles Schwab Retirement Savings Calculator use a Monte Carlo model to simulate hypothetical market scenarios. This model compares outcomes in situations that cannot be easily predicted. The T. Rowe Price tool allows you to adjust your savings, age of retirement, and living expenses needed for retirement. The Monte Carlo model then provides a range of future outcomes based on 1,000 hypothetical scenarios. Similarly, Charles Schwab uses a Monte Carlo model to estimate how much your portfolio balance has a 90% chance of lasting through the end of life expectancy.

4. The calculator’s defaults & assumptions

Interpreting sample data must be done carefully in any statistical analysis. Retirement planning must account for fluctuations and involves numerous variables, including:

  • Risk profile

  • Age

  • Income sources

  • Budget

It’s important to consider what a tool is assuming—and what numbers it’s using as defaults. For example, many tools discussed above use between 65 and 67 as an average retirement age (which may not be the case for many individuals). Others (including NerdWallet and Vanguard) account for a 3% inflation rate increase. And there are differences in what’s considered optimal savings (T. Rowe Price claims that 60-85% of pre-retirement income is needed to maintain a standard of living during retirement; NerdWallet claims that 70% is best). 

The best tools list out data and assumptions. For example, both T. Rowe Price and Charles Schwab explain how they account for market expectations, investment styles, asset allocation, inflation and taxes, and risk profiles. NerdWallet also has a section dedicated to explaining its default assumptions. However, some tools like the BankRate calculator do not provide extensive insight into baseline assumptions. It’s oversights like these that hinder a tool’s thoroughness.

Different calculators can generate different results

Entering the same numbers into different calculators can yield disparate results (i.e. your retirement account balance!). To illustrate, we used the following inputs and assumptions across three separate tools:

  • Age: 35

  • Retirement age: 67

  • State of residency: California

  • Annual income: $100,000 

  • Amount saved for retirement: $10,000

  • Portion in qualified retirement accounts: 75%

  • How much are you contributing annually: 10% ($10,000) 

  • Investment style: Moderate

  • Income required at retirement: 80% 

  • Returns in retirement: 5%

Next, we tracked their outputs. Here's what we found:

Charles SchwabCharles Schwab predicts our sample individual would have $1M saved at age 67, but would need to save an additional $1,497,000 (for a total of $1.5 million) to retire at that age. The tool requires users to estimate their annual retirement spending (as a dollar amount or percent of income) and suggests 80% as a common annual retirement spending estimate. It automatically calculates Social Security benefits. Finally, the tool provides tips for users to “get on track,” including suggestions to change our sample retirement to age 77, increase retirement contributions, and reduce spending while in retirement.
NerdWallet NerdWallet assumes our sample individual is 42% to their retirement goal. They predict they’ll have about $1.21M saved, but will need about $2.88M. It’s important to note that this tool assumes 67-years-old as the retirement age, a 3% inflation rate, salary increases of 2% per year, and a 5% rate of return in retirement (what NerdWallet considers a conservative portfolio). It does not account for gender or location and does not factor in an employer match.
VanguardVanguard predicts a retirement savings balance of $465,000 (compared to Charles Schwab’s $900,000 and NerdWallet’s $1.21M). The tool considers an individual’s current income, calculates income at time of retirement, and multiplies the results by the percentage of income replacement. It does not account for Social Security. It assumes individuals will spend approximately 4% each year in retirement, a retirement age of 67, and 3% annual inflation.

Questions to ask when looking for a retirement calculator

To help ensure a tool is providing accurate results, here are some questions to ask*:

  • What does the calculator assume about how much money is needed in retirement?

  • Does it provide a model for expenses in retirement?

  • Does it account for assets and liabilities outside of retirement accounts? Or ones that a spouse or partner may have?

  • What does it assume individuals contribute to their retirement savings every year? 

  • What does it assume about life expectancy (and is it different across genders)? 

  • Does the tool default to a specific retirement age? 

  • Does it account for employer contributions? And if it mentions a 401(k), does it mention a match? 

  • At what age does the calculator assume an individual starts taking Social Security? And, if married, their spouse?

  • What assumptions does it make about investment allocations?

  • What assumptions does it make about the rate of return? 

  • What assumptions does it make about salary and income across the course of a life? 

  • Are there assumptions being made about inflation? 

  • Does it assume continuous workforce participation?

*These questions are hypothetical and not representative of all retirement planning tools or calculators. Investing is subject to risk and interactive calculators are meant to be used as educational tools.

Plan for retirement with the right tools

Human Interest is constantly developing retirement tools around businesses and their employees. Our most recent tool, the 401(k) Plan Cost Calculator, helps businesses better understand the costs of administering a 401(k). Learn if a retirement plan can help your small business qualify you for tax incentives. 

Check out some more tools:

We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment advising, and integration with leading payroll providers.