A Retirement Savings Calculator Is Your First Step Toward Your Golden Years


Tools & Calculators

Most of us would like nothing more than to quit our day jobs as soon as possible and ride off into a fully-funded, long-lasting sunset. Unfortunately, the vast majority of us have very little chance of actually achieving the dream of an early retirement sustained by unlimited riches, which is why it's so important to take advantage of retirement savings calculators like the one available below.

As current retirees who depend almost entirely upon their Social Security benefits can tell you, it's never too early to start building your retirement savings. In fact, with Americans living longer, thanks in part to medical advances that will likely continue to extend the average lifespan, the amount of money you'll need to save if you want to retire comfortably is only going to increase in the coming decades.

It's also important to note that Social Security wasn't designed to be the sole source of income for retirees. It was intended to be one leg of a three-legged retirement stool; the other two legs were company pensions and individual retirement savings.

In recent decades, however, most large employers have replaced employee pensions with 401(k) accounts, which are literally as reliable as the stock market is. As for retirement savings, too many Americans these days either can't afford to sock anything away for their golden years, or end up trying to improve their current standards of living at the expense of their retirement savings.

Beyond that, the recent real estate crash and the resulting recession did significant damage to the employment prospects of millions of people, forcing many of them to accrue significant credit card debt and/or to drain their savings accounts. As a result, many Americans are faced with a difficult choice between contributing to their retirement savings vs. paying down debts, and the correct choice is likely to be as unique as each person's individual situation.

Of course, the question of paying down your debts vs. saving for retirement also affects other areas of your financial picture. A major factor is the effect that your credit-to-debt ratio has on your credit scores. FICO, the originator of credit scores, estimates that 30% of your credit score is determined by how much money you owe. People with large outstanding balances tend to see their credit scores suffer as a result — especially as those balances move closer and closer to their maximum credit limits.

Lower credit scores, of course, lead to higher interest rates on loans and credit cards, which in turn lead to higher monthly payments and, consequently, less money available to contribute to retirement savings.

It might therefore seem more beneficial to focus solely on paying down debts, especially since saving for retirement is obviously a long-term benefit. However, ensuring a comfortable retirement requires you to find the right balance between your immediate financial needs and your long-term financial goals.

There are no easy answers, but if you want to retire early enough to enjoy your post-career days, you need to make a financial plan that helps you do so. The Retirement Savings Calculator below is just a first step down your path toward retirement, but it's a vital one — after all, even the longest journey begins with a single step — so be sure to take that step now.

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