Does Your Retirement Plan Add Up?

Online financial tools can help you plan your future. — Photo by Owen Gatley

Dear Liz: We're about 10 years away from retirement, and we think we're saving enough, but how can we know for sure?

The crazy stock market isn't exactly helping our confidence. Even the best-laid retirement plans can be hijacked by reality. But you can improve the odds if you run your numbers through the right online tools. Start with AARP's Social Security Benefits Calculator, which can help you determine the best time to claim your benefits and how big a check to expect. Embedded in the AARP calculator is a link to the Social Security benefit estimator, which, unlike most online retirement calculators, gives you amounts based on your actual work record, rather than estimates created from your current income.

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Your next step: Figure out your retirement costs. Vanguard's interactive worksheet can help you predict future expenses by itemizing your current expenses. Then you can "stress-test" your plan using a retirement calculator. I've tried dozens of these calculators over the years; one of my favorites is the latest version of T. Rowe Price's retirement-income calculator.

Many calculators use (or make you guess) fixed rates of return for investments. But the T. Rowe Price calculator simulates various market conditions to better predict whether you'll run out of money. The Preparing for Retirement option lets you specify how much you'll spend in retirement, a more precise approach than the one-size-fits-all number used by calculators that assume your future spending will be a set percentage (usually 70 to 80 percent) of what you spend now.You'll still want to run your plan past a fee-only financial planner, but these tools offer clear insights about whether you're on track.

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