Financial Calculators - What They Mean

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What can financial calculators tell us?
Most people are interested in what situation they will be in when they retire. Everyone has an idea of how they would like their life to be. If you input what you are currently putting away for your retirement into a retirement calculator it can tell you what you can expect to have at the time of retirement. This can help you make any needed adjustments to be sure you can have the retirement life you want. This valuable information is at your fingertips. Just surf the internet to find a retirement calculator and start inputting the numbers.

Many people do not understand what a basic retirement calculator is telling them and they do not understand how it gets the numbers it spews back out at them. A basic retirement calculator is a guessing machine that takes current conditions, puts a huge guess for future trends on the current conditions, and then it tells you that there is no way you will be able to retire.

What the calculator does is determine what your standard of living is costing you now and tries to predict what that same standard of living will cost you at the time you are ready to retire.

Most financial consultants use a retirement calculator to stress the need to save as much as possible for your retirement. The calculator compares cost of living expenses now with what they will be in the future, maybe 15 to 20 years down the road, or whenever it is that you will be ready to retire. Those numbers can be a bit overwhelming. But remember it is just a shot in the dark estimate.

Some people are discouraged by the economy and its instability over the years. They feel that it may be better to enjoy what you have today and not even bother worrying about what tomorrow will bring.

Can We Predict the Future?

The economy has been extremely unstable and unpredictable over the years. That is evident by the millions of dollars that have been lost on investments when the market crashes as it has every 10 to 20 years over the last century. One thing is for sure, the prices have consistently risen throughout the years. Consider how much it used to cost to buy a car.

Today, only 60 years later, that price has gone up over 2,700% to over $16,000 for a new car. So when you put an inflation percentage of 4% or 5% a year you are really not being honest with yourself. Between 1979 and 2000 the average American salary only went up by 11.5 cents per hour per year. A basic retirement calculator doesn't take that into account either.

Toni Shrader
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