Search the Net for "retirement-planning software," and you'll find dozens of tools -- most of them free -- that call themselves retirement planners. Some are simply calculators that will tell you, say, how fast your 401(k) will grow if you contribute the maximum amount for the next 20 years.
The better, more sophisticated ones, which generally cost anywhere from $70 to $199, help you create a detailed financial plan by factoring in such variables as income, savings, spending habits, and investment performance.
GOOD RECORDS VITAL. After doing some investigation, I picked four software programs to test: ESPlanner, J&L Retirement Planner, Real World Retirement Calculator, and Torrid Tech's Retirement Savings Planner 2005. I compared them -- all of which can be either downloaded from the Internet or installed with a CD -- based on ease of data entry, planning approach, results generated, and effort required to keep the figures up to date.
Their strengths and weaknesses vary, but all can help you determine whether you are on track to meet your financial goals for retirement and how changes in your situation, such as a new job, can affect your planning. Regardless of which program you use, remember that the do-it-yourself approach works best if you have kept your financial records in good order and are fairly knowledgeable about investing, taxes, and other financial fundamentals.
I started my research by measuring the time it took to figure out how the software works and get data into it. With the exception of Torrid Tech's Retirement Savings Planner, I couldn't get very far into any of the programs without having to look something up either in the help section within the program itself or in tutorials and manuals that come with the software.
JUGGLING SCREENS. ESPlanner does a good job of explaining how to enter information on each screen. But you won't understand the program's recommendations unless you read the tutorial to familiarize yourself with underlying concepts and terminology, such as "living standard."
The tutorials run from 47 pages for Real World Retirement Calculator software to more than 90 pages for J&L. The formats used by J&L and Real World Retirement Calculator require you to do a lot of toggling back and forth between the screens where you input data and windows with instructions on how to fill them.
Another key difference is complexity of approach. Torrid Tech's Retirement Savings Planner asks when you want to retire and what your retirement-income goal is, and allows you to manipulate your pre-retirement spending, anticipated investment return, and other factors to see how close you can get to the objective.
A CONCISE SPREADSHEET. ESPlanner goes further, recommending how much of your disposable income to spend each year, how much to save, and even how much life insurance you should buy prior to retirement. Want to know how having a child will affect your financial plans for retirement? This program contains good tools for figuring it out.
The other two programs, J&L and Real World Retirement Calculator, allow you to enter a large amount of detailed financial data -- such as each asset, what tax you may pay on it every year, when you may sell or withdraw money from it, etc. -- to calculate impact on retirement. If you're good about keeping that data current, either program can serve as a record of almost every financial decision you make in the course of a year. Some might find that helpful -- others may not.
Torrid Tech's Retirement Savings Planner requests the least amount of information and creates one spreadsheet with a concise summary of current and future income, as well as special expenses such as your children's college tuition. It will tell you how close you are to your goal, but it doesn't actually suggest how to make up for any shortfall. ESPlanner allows you to work out solutions to financial issues, such as when and whether to sell your home and when to make withdrawals from retirement accounts.
COST OF UPDATES. J&L produces a year-by-year report -- which it calls a scenario -- for the rest of your life, including excruciatingly detailed data on just about any financial event you can think of, ranging from getting a $100 rebate on your recently purchased computer to receiving a large inheritance.
Using Excel spreadsheets, Real World Retirement Calculator provides a detailed accounting of your potential retirement income from each asset. You can also calculate annual spending figures based on your estimated costs for scores of items -- from toothpaste to your safe-deposit box -- over the next 75 years. When all the numbers are crunched, you get a three-screen "financial independence analysis" telling you if you're meeting your financial goals at a certain age, and if not, how much additional money you'll require.
To use any of these programs as your primary retirement-planning tool, you'll need to buy annual updates that address tax amendments and other issues. You'll also have to enter new data at least once a year -- or perhaps more often if your financial situation or goals change.
STICK WITH THE PLAN. Because they require much more data input, you'll find that keeping your J&L or Real World Retirement projections current will take more time than doing so for either ESPlanner or Torrid Tech's Retirement Savings Planner. But whichever program you choose, you have to invest the time in maintaining the plan for it to be of significant use to you.
And that's the easy part -- because you also have to stick to the budget and the plan you and your program figure out. By Ellen Hoffman