07/21/97 FOR THE GOOD LIFE, HIT 'ENTER'

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FOR THE GOOD LIFE, HIT 'ENTER'
Software and Web sites can help you plan for retirement
Who doesn't dream of a comfortable retirement spent combing tropical beaches or schussing down the slopes of Aspen, Colo.? But for many Americans, those dreams won't become reality: Merrill Lynch & Co.'s latest retirement index suggests that the average Baby Boomer will need to nearly triple his or her rate of savings to maintain their current standard of living in their twilight years. If you'd like to see where you stand, there are a number of software programs and Web sites that can help provide a quick snapshot of your retirement outlook.
Chances are, a retirement-planning program already is under your nose: Most of the popular home-budgeting programs, like Quicken, Microsoft Money, and Managing Your Money, contain simple retirement calculators, and the Internet is full of Web sites sporting similar fare. But most of the budgeting programs and Web-based calculators are limited in scope, often overlooking such critical considerations as taxes. To do some serious planning, fork over a few extra dollars for a dedicated retirement-planning program, such as Quicken Financial Planner or RetireReady Deluxe. By analyzing your investments, income, spending patterns, and other criteria, these programs can help determine if your nest egg will be enough to carry you through the golden years. If not, they will suggest a savings plan to help you meet your goals.
Be forewarned that for all the improvements to retirement software in recent years, you shouldn't take their findings as gospel: For instance, too many programs don't explain the critical assumptions underlying their computations, such as those that go into determining life expectancy and tax rates. This makes it hard to determine whether they are being too rosy or excessively conservative. Still, the programs can help give you an early sense of whether you will need to consult a professional planner.
The best program for Baby Boomers--for whom retirement is still years away--may be Quicken Financial Planner (QFP). While cheaper programs simply calculate how big your nest egg will be come your 65th birthday, QFP allows you to build a comprehensive ''life plan'' projecting annual income, savings, and expenses from now until your 125th birthday. QFP also is one of the few programs that allows you to compute your income and retirement benefits separately from those of your spouse. QFP factors in other major midlife expenses, too, such as the hole your kids' college tuition will eat in your savings.
SAVVY. For all its strengths, QFP has some inexcusable flaws: The program assumes today's thirty- and forty-somethings will receive full Social Security benefits at age 65. Not so. Current law bumps retirement age up to 67 in coming decades. And while QFP offers advice on diversifying your nest egg between stocks, bonds, and other assets, it takes an unconventional approach: Rather than make recommendations based on your age and circumstances, it asks what return you expect to achieve on your investments. Give a low-ball figure, like 6%, and QFP will recommend a portfolio designed to earn 6%, mostly bonds. For most savers, that's bad advice.
If, on the other hand, retirement is either at hand or happening, Vanguard Retirement Manager may be your better bet. Designed by the folks behind the Vanguard funds family, the program was created to help current retirees keep track of their cash flow and assets. The program's real strength, however, is the ease with which it handles such prickly issues as minimum required distributions: For that, Vanguard provides calculators that show how each of the different methods of determining the required minimum distribution would affect your tax-deferred accounts.
As good as both these programs are, they provide so much hand-holding that they'll slow down more sophisticated users. If you're the financially savvy type who just wants to experiment with different retirement scenarios, you will probably be happier with Price Waterhouse's Retire Secure. The program is just what you would expect from a Big Six accounting firm: The help screens are full of legalese, and the graphics are flat. Still, Retire Secure's calculators provide the best combination of power and flexibility--making it easy to run countless ''what if'' exercises. While you're calculating your retirement picture, you can also use Price Waterhouse's companion program, Survivor Secure, to determine whether your insurance, savings, and other assets will be enough to provide for your loved ones should you die unexpectedly.
LONGEVITY. If your problem is that you don't know a 401(k) from a 403(b), you should consider RetireReady Deluxe. While RetireReady's interactive calculator is too basic for most users, its real strength is the wealth of information it provides: Available only on CD-ROM, the program includes a multimedia tutorial that demystifies such issues as reverse mortgages and how Social Security benefits are calculated. RetireReady also provides an extensive database, including the addresses and phone numbers of hundreds of government and private resources serving retirees. And the program, with a built-in browser, provides links to hundreds of other retirement-related sites on the World Wide Web.
For better or worse, most of these programs posit a set of conservative assumptions, such as 4% inflation (above the current trend) and 7% investment returns (well below Wall Street's recent performance) that could cause you to overestimate your savings needs. T. Rowe Price Associates Inc. takes a different tack with its new Retirement Planning Analyzer. Price worked with the Washington-based Tax Foundation, a policy organization, to come up with effective tax rates for future retirees that are perhaps more realistic, and certainly lower, than assumptions used by other programs. And while other programs treat all your contributions to a 401(k) the same, the Price program does a better job of segregating after-tax contributions. The bottom line: Using the T. Rowe Price program may give you a smaller estimate of your future savings needs. But in retirement saving, more is always better. And given Americans' growing life expectancy and the shakiness of Social Security, if you can do without the current income, you're better off taking a more conservative posture.
Then there are the many free retirement resources on the World Wide Web. You'll find dozens of retirement-related sites--many the handiwork of financial- services firms wanting to sell you a variable annuity or mutual fund--that sport retirement calculators and primers to help you determine if you're on the right course. InvestorGuide's Retirement site (www.investorguide.com/retirement.htm) offers links to about two dozen planning calculators, including one from Northwestern Mutual that calculates your life expectancy. Be aware that some such calculators are so simplistic, they don't even factor in government limits on contributions to a 401(k) plan.
Three of the best sources for general information on retirement planning are the Web sites of Vanguard, the American Association of Retired Persons, and the Social Security Administration. ''Vanguard Online University'' (www.vanguard.com) offers primers on such complex issues as the tax considerations of cashing out of a 401(k), 403(b), or Keogh plan. The AARP Webplace (www.aarp.org) offers tips on financing your retirement and lists other nonprofit groups that serve seniors.
Alas, amid congressional concerns over security, the Social Security Administration has suspended a service allowing you to order a detailed benefits estimate online. But there's enough info to warrant a Web-site visit: The SSA (www.ssa.gov) provides online access to more than 600 of its documents, including When You'll Get Your Benefit.
Chances are, Social Security will cover only a portion of your retirement needs. And employers are cutting back on traditional pensions in favor of 401(k)s you manage yourself. As a result, early planning is more important than ever. Using a software program can help ensure that your retirement years will be spent in style.
By Dean Foust in Washington

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