What’s ultimately the reason why future retirees seek advice from retirement managers than using online retirement calculators? Without any upper hand, a business can be undermined and replaced. Similarly, that’s what calculators from CNNMoney, Bloomberg, and other sites do to any unsuspicious and future-conscious person. What most of the calculators include are average return on retirement account, the amount of income deposited per year, your current age, and your goal retirement age. This is the plan for grandparents that is followed by the average Joe in the States. Even with some advance calculators, they will put in education costs for your children and weighted inflation rates. But what every calculator fundamentally forgets is that every savings-hungry person has family from the generation before or after you and must account for their cost of living as well. With the uncommon cases that a single person is saving for themselves, regardless, there are other unheralded costs. Sure, you can use these calculators to determine how much you need to save, but what do you use to figure out how much is enough? That’s when these calculators become obsolete and wealth management practices begin.
Various factors play into retirement goals, and outlining them are essential to figuring out that retirement fund goal. What are the costs for your children’s education? Public or private education? What will their college tuition, board, and supplies cost? Let alone, education is complex with its rising tuition costs and the innumerable paths a student can take to make income. With all these unknown factors, overestimating your goal can be less harmful than underestimating your goal. The cost of living varies from each household, from food to necessities and leisure costs. Along with the uncertain future of the consumer cyclical sector, the cost of living arguably rises with the rise of inflation. The calculation of inflation is solely tied into the change in average costs of consumer goods, and directly influence each other as they have over the course of history. The safest solution to these headaches are to factor an inflated inflation rate, which would be over 3% per year for the costs of living. Along with education, as public university systems like the University of California system raises tuition fees for the staggering rise of incoming college students, inflation needs to be accounted for as well.
Besides the costs of necessary living and education, taxes and insurance plays an important role in retirement saving. Any capital consuming fees that are constantly swept under the radar like private tutoring, traveling, extracurricular fees, and emergency funds need to be accounted for. Besides all of these income-sucking expenses, there are some benefits you can reap through your employers like pension funds and matching programs that effectively double your retirement savings. All of these are essential and undervalued in the selection of an employer, but if you’re truly an Underage Investor, know that you’re well-ahead of your age group.