The Best Retirement-Planning Software
Who wouldn't want a financial planner on his or her hard drive? With the
latest generation of retirement-planning software, you can get pretty close.
A good retirement-planning program will help you set a budget for your chosen
retirement lifestyle, determine a savings goal that should get you there,
and point you to the investment mix that makes the most sense for you.
Not surprisingly, some retirement-planning software packages are better
than others. The best are somewhat conservative, according to Robert Wolfe,
a certified financial planner and vice president at Compu-Val Investments,
in Wilmington, Delaware. They don't let you assume you'll make 20 percent
a year in the stock market forever, even if you happened to last year. They
use realistic assumptions for your pre- and post-retirement tax rate, include
state income taxes, and make distinctions between your tax-deferred savings
and your taxable ones.
The best programs do even more, adds J. Michael Martin of Financial Advantage,
in Columbia, Maryland. They force you to make a realistic determination of
your post-retirement expenses--and not just throw a number like 75 percent
of your current budget into the mix. They also allow you to plan singly or
as a couple and to factor growth into the equation, expressing your annual
savings needs as a percentage of your salary or as a dollar amount that rises
with your expected earnings. Some programs will even connect you to a trove
of useful information online.
Retirement-planning software can be divided into two basic types:
Some packages--notably Microsoft Money and Quicken--are comprehensive checkbook,
investment, and money-management programs that include retirement-planning
modules.
Others, more specifically dedicated to retirement planning, don't include
day-to-day checkbook or similar features but may give you a wider choice of
retirement-planning variables and may work faster.
Still, with numerous Web sites now offering free retirement-planning calculators
of their own (see
"The Best Retirement-Planning Web Sites"), you might want
to know, who needs to buy software? The answer: anyone who wants to plan with
great accuracy and in great detail, revisit his or her plans again and again,
or store intimate retirement data and calculations on a personal computer
instead of on someone else's Web server.
Most of the software packages we list here are inexpensive. Some--Microsoft
Money 2000 Deluxe and Torrid Technologies' Retirement Planner 99, for instance--offer
free trial versions online. Here, in alphabetical order, are some of the best
programs we tried out.
Financial Tools: This isn't just a retirement planner--it's
a set of financial calculators that lets you monitor your mortgage, check
up on bond earnings, analyze loans, and more. Its retirement-planning module
is a bit stripped down compared to the ones in other programs, however. For
example, it ignores the tax aspects of retirement saving and spending. If
you want a slew of financial calculators that go beyond retirement planning,
such as tax and balloon-payment mortgage calculators, Vorton also sells a
version called PowerTools for $40. (Note, though, that the retirement-planning
module is essentially the same as the one in the cheaper program.)
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Kiplinger's Net Wealth: The program is slower than many competing
products and its screen is busier, but this software does let you go online
to tap a number of databases, and it offers one of the most thorough retirement-planning
modules around. For example, the program integrates spousal retirement plans;
provides separate treatment of Roth IRAs, 401(k)s, IRAs, and taxable investments;
accounts for housing costs; and predicts your bottom line depending on whether
or not you sell your home when you retire. There's a lot more, as well, on
nonretirement issues like investment management and debt reduction. While
the software comes with the Microsoft Internet Explorer Web browser, it does
not work with Netscape Navigator.
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Microsoft Money 2000 Deluxe: This program allows you to track
your investments and regularly check whether they're getting you closer to
your retirement goals. It links to MSN MoneyCentral, Microsoft's Web site,
which offers information about stocks and mutual funds, as well as financial
news. The program's thorough what-if feature lets you jiggle your retirement-planning
variables. Perhaps most important, it allows you to plan your retirement based
on when you can afford it rather than when you feel like it. On the other
hand, if all you want to do is crunch some retirement estimates, this program
probably constitutes overkill.
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Plan Retirement Quick & Easy: This one lives up to its
name yet does not oversimplify. For example, you can include or exclude a
spouse's financial data at the click of a button, plan in today's dollars
while the program adjusts for inflation, build realistic tax rates into your
estimate, separate taxable and tax-deferred investments, and change every
variable to play "what if" games with your projections. Portfolio advice appears
in colorful pie charts, and the program can link you to the Internet to get
information on investments, health insurance, and places to retire. It cannot
help you figure out precisely which investments to put your money in, however.
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Quicken Deluxe 2000: The latest version of Quicken is a fully
integrated, easy-to-use program that can help you manage every aspect of your
financial life. In addition to retirement planning, it provides tax planning,
day-to-day money management, and portfolio management that links with the
comprehensive Quicken.com
Web site. And if you've gone as far as you want to by yourself, it will print
a detailed report to take to a human financial planner.
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Retire Secure: This one's fast and simple to use, but precise
only to a point, mainly because it doesn't deal with taxes. Instead, it leaves
it up to you to include them in your estimated expenses. On the positive side,
it has a pleasant interface and lets you override its recommendations on everything
from life expectancy to inflation. You can enter retirement expenses as a
percentage of current spending or as a dollar amount. You'll quickly get some
rough answers about whether you are on track.
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Retirement Planner 99: This fast program attains its speed
by eliminating much in the way of helpful directions or guidance. Its assumptions
of inflation and investment returns are conservative (4 percent and 6 percent
annually, respectively), while its tax-rate estimations are overly conservative
(it uses marginal tax rates throughout instead of assuming that some of your
income will be taxed at lower rates). Still, you can punch in a quick-and-dirty
picture of your assets and expectations all on one screen and, in less than
5 minutes, get a nifty bar chart showing the results. Slide the cursor over
the bar chart, and you can see exactly how much money you will spend and how
much you will have left in any year of your retirement plan.
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Retirement Planning Analyzer: This is probably the most sophisticated
retirement-planning software on the market today. It differs from other programs
in three ways: It can take into account multiple retirement plans and 401(k)
matches that move to higher rates as you contribute more; it treats IRAs and
Roth IRAs separately; and it offers the latest thinking on tax rates--for
example, it suggests that many planners overstate the role of marginal tax
rates on retirement income. Leaving nothing to chance, it concludes by helping
you plan your portfolio (but only, of course, using T. Rowe Price funds).
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$10 downloaded from Web site, $20 by mail order
T. Rowe Price
800/541-8803
www.troweprice.com
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