How to Make Sense out of a Retirement Calculator

A retirement calculator is simply a tool that allows you to "reasonably" compute just how early you can retire from working. To arrive at the correct conclusion, however, a retirement calculator needs you to input the following the information.

1. Year of Birth - The earlier you start planning, the better because it provides you with a longer time frame in which to save and invest your money properly.

2. Tax Bracket - This will give the retirement calculator an estimate on how much your income is reduced by taxes, what benefits or additional fiscal dues are associated with your tax classification.

3. Retirement Age - This gives the retirement calculator an idea on how much you should save in order to reach your retirement goals.

4. Years in Retirement / Life Expectancy - The retirement calculator would need to know just low long your plan would be in use as your main source of income.

5. Current Salary - Naturally, your present salary plays a huge role in determining the outcome of your retirement plan. If your current salary is too small, for instance, you may be forced to invest for a long time and wait till you reach the maximum working age of 70 before you can retire in semi-comfort.

The second category that a retirement calculator would ask you to fill out would be regarding your retirement plan.

1. Desired Income - How much do you wish to live on every month after your retirement? You must be realistic when it's time to input a figure because this is something that you have to work hard over the year; it is definitely not a product of wishful thinking.

2. Amount for Heirs - How much do you wish your plan to set aside for your heirs? Most plans usually have clauses that concern the rewards or dues for beneficiaries. It's important that you already know who you'd wish to benefit as well from all your hard work. Along with a retirement plan, it's also prudent to take care of setting up a will early on.

The third category of questions concerns information of your investment portfolio.

1. Growth Rate - What is the percentage of growth of all your investments? This information could be used to shorten the estimate time needed for you to reach your retirement goals.

2.Inflation Rate - This is the opposite twin of the growth rate and it should be taken into account as well because it has the power to drastically affect your investments and cause you to work longer than necessary in order to attain your goals.

The fourth category deals with all other investments, properties and accounts that are subjected to special fiscal or tax considerations.

1. Tax Deferred Retirement Plans - Consider this as manna from heaven because it speeds up the time you need to achieve your goals

2. Tax Deferred Individual Retirement Plans - Meeting certain conditions can make an employee qualify for such plans. Be sure to check with the nearest government agency to find out more.

3.Tax Deferred Investments - You can consult with your bank manager to find out which tax-deferred investments you can benefit from as well.

4.Taxable Mutual Funds - If you have no knowledge of mutual funds, your bank manager can once more provide you with the necessary information

5. Fixed Assets - These assets can also be utilized to shorten the time frame used in your retirement plan.

Tips on Using a Retirement Calculator

- Avoid using simple retirement calculators; although they're certainly easier to use, the simplicity of the formulas they use will often produce inaccurate and misleading results.

- You do not need to approach a financial consultant to benefit from a retirement calculator; there are many retirement calculators that you can easily find online.

- Use a retirement calculator to evaluate your present strategies and goals and see if they are still viable and attainable.

- Do not subject a retirement calculator to one-time-use only. A retirement calculator must be regularly used for you to see if your strategies are continually effective.

- Make sure to use a retirement calculator the moment there are any changes involving your income, investments or even your health condition!

- If there is any possible way to further increase your income or decrease your expenses, do it. Then use a retirement calculator and see how it affects your plan - in a positive way of course!

CSRS or Civil Service Retirement System

The Civil Service Retirement System has been in place since 1920 giving disability, retirement, and survivor benefits to the majority of civilian employees in the federal government. In 1987, FERS or the Federal Employee Retirement System was put into place to replace CSRS, however there are still over one million people collecting CSRS benefits each month.

Retirement benefits through CSRS are a little confusing. The amount of benefit in retirement is based on not only the duration of service, but also the average pay received over the highest three years of pay. In other words, if you worked for them for 25 years, and the last 3 years were the years when you were paid the most, those three years would be averaged together and your benefits would be based on that number. I think. Retirement benefits are presently being financed by both the government and employee contributions to the retirement fund.

There are eligibility requirements to receive the benefits of CSRS. An employee is qualified to retire voluntarily if the following provisions are met: Five years of creditable civilian service; separated from a position subject to CSRS coverage; is covered by CSRS for at least one year in the following two years after leaving the position; and meets age/service combinations of age 55 with 30 years of service, or age 60 with 20 years of service, or age 62 with 5 years of service. Employees who separate from service and have met all requirements except for age/service combination may be permitted to a deferred annuity at age 62. There are also stipulations regarding this benefit.

Honorable active military duty may also qualify, subject to conditions. It was executed before the separation date upon which is the basis for entitlement to annuity; it is not comprised in computation of military retired pay except for certain service-connected disability requirements; if the military service was executed after December 31, 1956, some employees will have to create a deposit for the service to receive firstly or for other employees, to retain credit after the age of sixty-two.

Although the service used in determining an employee's eligibility for retirement is typically the same as creditable service for computation purposes, there are some exceptions: periods of CSRS service refunded, will not be creditable unless a redeposit is made; if the refunded service was executed before October 1, 1990, it will be qualified even if no redeposit is made but the annuity will be actuarially decreased; non-education service is made on or October 1, 1982, is not qualified if a deposit has not been made.

There are so many stipulations and qualifications for the benefits of CSRS, they cannot all be listed here. The best advice that can be given on the benefits of CSRS is to speak with someone in person who can help you better understand your rights and benefits under the Civil Service Retirement System or Federal Employee Retirement System.