When you participate in a workplace 401(k) plan, you must answer two basic questions – “how much do I save” and “where do I invest?” In the past, these questions were difficult to answer due to a lack of available information. The Internet has changed that. Today, there are numerous online calculators - some better than others - available to help keep your retirement savings on track and take the guesswork out of 401(k) investing. Some of my favorites are summarized below.
Many financial planners recommend you save at least 10% of your income for retirement, starting in your 20s. You want to start saving as early as you can because the longer you wait, the higher the income percentage you will need to save to meet your retirement savings goal.
To help you target an appropriate savings rate, I recommend using an online retirement income calculator. You want to find a calculator that estimates your retirement income – based on your current account balance and future contribution rate – instead of one that simply estimates a future account balance. This feature is important because it can be easy to underestimate the account balance you’ll need to retire when you don’t know how much income it will buy you throughout retirement.
Below are links to online calculators that can help you estimate the amount you’ll need to save to retire comfortably:
When investing in a 401(k) account, you have three basic options:
If you are an investing novice, I strongly recommend options 1 and 2. However, if you think you’re up to it, there are online calculators that can choose investments for your 401(k) account: