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Why You Should be Using Retirement Planning Software

Doug Carey, CFA

Key Points 

  • Retirement planning software can help bring you peace of mind and can help you wrap your arms around your retirement and financial situation.

  • By using retirement planning software to project your future finances you can also get a sense of what your risks are.

  • Good retirement software not only projects your finances accurately into the future, it also allows you to run what-if scenarios on Roth IRA conversions, recessions, future inflation, delaying Social Security, asset allocation, taxes, and many other important retirement variables.

 Retirement Planning Software

Planning for retirement is one of those things that many people put off. Usually these are the same people that put off going to the doctor hoping that everything will be just fine. But this is a bad strategy, especially since planning for retirement is easier than ever!

Do-It-Yourself Retirement Planning

WealthTrace’s retirement planning software application is built so consumers can plan their own retirement without the need for a financial planner or financial advisor. Do-it-yourself retirement planning has become much easier and more popular in the last decade with faster internet speeds, the ability to link and import investment accounts, and better user interfaces. 

With WealthTrace you can build your own retirement plan that is equal to or better than the plans that financial planners build. It’s also less than 1/10 the cost and empowers you to change variables and see your projections whenever you want. 

Let’s look at a few reasons you should be using accurate and comprehensive retirement planning software to plan for your future:

How Much do you Need for a Secure Retirement?

It used to be that $1 million was enough to retire on for most people. But with inflation rising, many people are looking to have $2 million and sometimes even $3 million saved for their retirement. But too many people are just guessing how much they need.

How much you need depends on many factors such as your projected spending, life expectancy, and how much you want to leave your heirs. This is why you need to enter all of these variables into a retirement plan to see just how much you need to have saved to retire stress-free.

Social Security and Pensions Have Risk

Social Security is expected to run out of excess reserves in 2034. At this point it will only be able to pay out about 78% of what it promised to retirees. Unless Congress acts and raises more money for Social Security, benefits will have to be cut. 

Many pensions are also in major trouble. Most government pensions very underfunded, which increases the risk they will have to cut benefits. On top of this, extremely high inflation has eroded the value of people receiving pensions today since most pensions do not adjust with the inflation rate. 

Because of these risks, it is important to be able to run what-if scenarios on your retirement plan to see how much of your retirement depends on income sources that might decline in the future.

Know How Much You Need to Save Today

One of the best reasons to build a retirement plan is to figure out how much you need to save today in order to retire at a certain age. Many people have no idea how much they need to save. Because of this, too many spend too much and don’t save enough. 

It is so important to save consistently to retirement accounts such as a 401(k) plan in order to get the power of compounding over time. Not only that, tax-deferred retirement accounts like 401(k)s and traditional IRAs give you an income tax break on the contributions. They also grow tax-free and are only taxed when withdrawn.

Save to the Right Accounts

Most of us know somebody who doesn’t have a retirement account but has a lot of money saved in a bank account. This is leaving money on the table to say the least. Everybody should have a retirement account set up and most of us should be maximizing our contributions to it. 

By using retirement planning software you can see just how valuable these retirement accounts can be. You can also run what-if scenarios to see if you should be in a different type of account. For example, does a Roth IRA make sense or should you stick with a traditional IRA? Should you convert to a Roth IRA in the future? When should you do the conversion and how much should you convert? These are all questions that can be answered with comprehensive retirement planning software.

Should You Move to a Different State?

There are several states that have no income tax. Depending on where you live now, it can make a big difference in terms of when you can retire. Moving to a different state can also mean much lower housing costs, which can lead to an earlier retirement as well. With good planning software you can quickly figure out the benefits of moving and whether or not it makes sense for you.

Be Prepared

Don’t put off planning for your retirement. It’s easier than ever to prepare with today’s technologies. If you have your retirement plan in place you will eliminate so much needless stress and might even be able to retire earlier than you had hoped. 

Do you want build your own retirement plan? Sign up for a free trial of WealthTrace to project when you can retire comfortably.

Do you want free tips on how to retire early? How about retiring stress-free? Learn how to make sure you do not outlive your money by signing up for our free articles.

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Doug Carey, CFA