Retirement: Add it up

Today’s lesson: How to retire on the riches of the Internet.

No, this is not about picking dot-com stocks. Rather, it’s a guide to the Web’s treasure trove of free financial calculators, so you can quickly and easily plan your retirement.

Here’s where to hunt for answers.

“ Start at www.smartmoney.com. Click on the tab marked “tools” and then scroll down the screen’s left-hand side until you find the 401(k) Planner.

Sure, there are more sophisticated retirement-planning programs. But SmartMoney’s 401(k) Planner is free and there’s no tedious registration process (full disclosure: SmartMoney is partially owned by The Wall Street Journal). More important, you can find out whether you are on track for a comfortable retirement by inputting just 13 numbers, all of which you should know off the top of your head.

One warning: Don’t try to compensate for your lackluster savings rate by assuming some ridiculously high portfolio return. After investment costs and given today’s lofty market valuations, it’s doubtful most investors will outpace inflation by more than two or three percentage points a year.

“ Do you have the right mix of stocks, bonds and cash investments? There are a bunch of Web worksheets that aim to help.

Try www.strong.com, Strong Financial Corp.’s Web site. Go to the section for individual investors. From there, head to “advice and education” and then look for the asset-allocation planning tool in the “investor resources” section.

“ To retire in comfort, you don’t just need a decent-size nest egg. It also helps to pay off your mortgage, thereby ridding yourself of a major monthly expense.

To that end, try the mortgage calculator at www.bankrate.com. The calculator will help you figure out how much to add to each monthly mortgage check.

“ Next, direct your browser to www3.troweprice.com/ric/RIC, where you will find T. Rowe Price Group Inc.’s retirement-income calculator.

To see whether your retirement nest egg will generate the income you want, you will need to plug in seven pieces of information. T. Rowe Price’s calculator will then use something called Monte Carlo analysis to test your retirement-spending strategy in a host of market environments.

“ For those age 65 and over, Social Security is the single biggest source of income. But how much will you get each month from Uncle Sam?

Try the Quick Calculator at www.ssa.gov/OACT/ANYPIA. To get a more accurate answer, you may want to fiddle with Social Security’s year-by-year income assumptions, especially if your earnings record has been erratic.

Many folks claim Social Security at age 62. But if you are likely to live until age 82 or 83, you may want to delay benefits until 65 or 66, thereby getting a larger monthly check. That, of course, raises the question of your likely longevity.

For an answer, try www.livingto100.com. It takes a few minutes to fill out the site’s questionnaire, but it’s worth the effort.

“ What if you don’t have enough for a comfortable retirement, even after taking into account your savings, Social Security and any pension?

To boost your retirement income, you might substitute an immediate-fixed annuity that pays lifetime income for part or all of your bond holdings. With this type of annuity, you hand over a chunk of money to an insurance company in return for a check every month for the rest of your life. To get a handle on how large those checks might be, go to www.webannuities.com.

But before you pony up any cash, head back to www.livingto100.com. The reason: Unless you buy a life annuity that guarantees a minimum number of payments, the income stream will die when you do. As a result, you want to be confident you will live long enough to collect a decent number of checks.