Nerdwallet Retirement Calculator Review

Posted on November 30, 2021 in Investing

How much money do you require to retire? In this review, we will show you how to use the free Nerdwallet retirement calculator to figure out what your savings goal should be and when you can expect to retire.

Now, let me ask you a question. How is your retirement looking? Do you have enough put away? In reality, you might not have set much aside for your retirement. Heck, you might not have anything set aside. This is where our Nerdwallet Retirement Calculator review can help.

Listen, we get it, planning for your retirement is hard. You might not know how to start, or what amount you should be putting back every month. If your heart is beating a mile a minute, stop, take a deep breath, and relax. Nerdwallet has your back. With their retirement calculator, all your stress will fade away. 

Our review of the Nerdwallet retirement calculator shows that it is easy to use. It will predict your retirement nest egg and estimate how it would stretch over your retirement in today’s dollars.

Nerdwallet’s retirement calculator also takes inflation into account. It comes with default assumptions that include:

  • Salary increases of 2% per year.
  • A 3% inflation rate.
  • A 5% rate of return in retirement (assuming a more conservative portfolio).

Working the Nerdwallet Retirement Calculator

Nerdwallet understands that not everyone is tech-savvy, so don’t worry, they left easy-to-follow instructions, which we’ll go over here. 

First, you enter your age. Then, go ahead and enter your pre-tax income. After entering your pre-tax income, you’ll need to add your current savings. 

Once you complete the first steps, you’ll see a plus/minus button with a certain dollar amount inside. This is under Every month I save.

Go ahead and add what you save every month. You’ll notice under the Nerdwallet Retirement Calculator money box it says 10% of my monthly income.

This is a good rule to follow, but if you can’t save 10% every month, that is fine, just put down whatever percentage you do save. 

There’s then an optional button to add any monthly retirement spending. If you’re not retired, then you can skip this. 

There are buttons for other expected income, which if you expect Social Security or any other means of getting money, you can add it here. 

Then you have I want to retire at age, Life expectancy, and Investment rate of return buttons. 

After filling all this information out, Nerdwallet’s retirement calculator goes to work. It’ll tell you how much you will need to retire at 67, and it’ll give you your retirement savings goal.

With our review of Nerdwallet’s retirement calculator, saving for retirement has never been easier, or quite frankly, as fun.

Also, you can fine-tune your retirement spending level, retirement age, and more. This will adjust what you will need to save if you decide you want to plan on retiring earlier.  

See, that’s not too hard, is it? With Nerdwallet’s retirement calculator, you can break out of that bad habit of not saving for your retirement easily. 

How To Boost Your Nerdwallet Retirement Calculator Savings score

Life can get busy at times… real busy, in fact. Sometimes, you may fall behind on your retirement goals.

Or, you had a change in plans and your goal is now to retire early. No worries, with these tips, you’ll get your retirement goals back on track and be able to improve your Nerdwallet Retirement Calculator savings score.

Individual Retirement Account

One of the most popular ways to save for retirement, thanks to its large tax advantages is an individual retirement account.

The maximum you can put in per year is $6,000. If you’re 50 or older, you can add an additional $1,000 a year. Based on the Nerwallet Retirement Calculator, it’s also a good idea to contribute enough to ensure that you receive all of the matching funds your employer may offer.

Raising Your 401k to Improve Your Nerdwallet Retirement Calculator Score

If you have a 401k through your job, then you most likely know you can take out a certain percentage of every check to add to your retirement. 

The annual limit for contributions in a 401k is $19,500. For those 50 and up, they receive an additional $6,500.

The best way to maximize your 401k, to have the retirement you deserve, is to contribute up to the percentage where the employer will match it. 

It doesn’t matter if your employer attributes a small amount or large, you definitely want to match it because it’s essentially free money.

Now, it becomes tricky to understand how much to put in when your employer does not offer a match or even if you’re trying to decide to contribute more than you need to get the match.

The amount of money you’ll need in your retirement funds depends on a few factors.

First, you need to decide when you intend to retire. Then you need to think about how much of your current income you’d like to replace and how much you want to rely on your Social Security.

Most experts in this field recommend saving 10% to 15% of your income. But to get a more detailed look into what you should be saving, we (again) suggest using the Nerdwallet retirement calculator.

If you can’t afford to put much back at first, that’s okay. Whatever you can put back at first, try to up the percent you contribute by 1% or 2% each year.

Related: Pay Off Debt Or Save For Retirement: How To Choose

The IRA Option

If you’re on track, but want to do more, an IRA could help you improve your Nerdwallet retirement calculator score.

For some people, an IRA may be a better retirement option compared to a 401k. Now, some people reading this might not know exactly what an IRA is. Once more, we’re here to help. 

An IRA, which is an individual retirement account, is a savings account with tax advantages that individuals can save and invest long-term.

An IRA is similar to a 401k account, but of course, there are differences.

A 401k plan is an employee benefit obtained only through an employer. However, any person with earned income can open an IRA retirement account to save long-term and enjoy the tax benefits they offer.

More facts about an IRA account:

  • IRAs are retirement savings accounts with tax advantages.
  • Different types of IRAs include traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs.
  • Money that’s held in an IRA usually can’t be withdrawn before age 59½ without having to pay a tax penalty of 10% of the amount withdrawn.
  • Annual income limitations for deducting contributions to traditional IRAs and for contributing to Roth IRAs.
  • The idea of an IRA savings account is that it’s meant to be a long-term retirement savings accounts. 
  • The IRA contribution limit is lower compared to the 401k limit. It’s $6,000 in 2021 and 2022 ($7,000 if age 50 or older).

Another option besides an IRA or the standard 401k is the Roth 401k. The difference between the standard 401k and Roth 401k is this: With a Roth 401k, your contributions are made after tax, but distributions in retirement are tax-free. This means you’ll never pay taxes on investment growth.

Now, whichever retirement plan you chose, you must be aware that there will be fees. These fees can be pretty big, too. For example, a median-income two-earner family could see around $155,000 of fees over their lifetime.

This can consume nearly one-third of their investment returns. 

Example Of Investment Fees

  • Brokerage account fees: Annual fees to maintain a brokerage account. Subscriptions for premium research. Fees to access trading platforms.
  • Trade commissions: Fees by a broker after you buy or sell certain investments. 
  • Mutual fund transaction fees: Charged by a broker to buy and/or sell some mutual funds.
  • Expense ratios: Annual fees charged by all mutual funds, index funds, and exchange-traded funds. These fees are a percentage of your investment in the fund.
  • Sales loads: A sales charge or commission on some mutual funds. These are paid to the broker or salesperson who sold the fund.
  • Management or advisory fees: These are paid by an investor to a financial advisor or robo-advisor. It’s normally a percentage of assets under management. 
  • 401k fees: These are paid to maintain the plan, often passed on to the plan participants by the employer.

Investing Definitions Based on the Nerdwallet Retirement Calculator

Before I let you go off on your own, I understand maybe some terms used weren’t familiar to you and that’s okay. Once more, I got you. Below is a list of a few key investing definitions to help you along your journey:

  • 401k: A retirement plan that companies offer employees. A 401k plan gives employees a tax break on money they contribute, which is automatically withdrawn from employee paychecks. They are then invested in funds of the employee’s choosing.
  • Compound interest: The interest you earn on both your original deposit and on the interest that the original deposit earns.
  • Contribution limits: The IRS puts limits on the amount of money that can be contributed to 401(k)s and IRAs each year. These limits sometimes change from year to year.
  • Financial advisor: A financial advisor offers consumers help with managing money. They advise clients on making investments, saving for retirement, and monitoring spending.
  • IRA: An individual retirement account that is a savings account with tax advantages that individuals can save and invest long-term.
  • Income: Money received, especially on a regular basis, for work or through investments.
  • Inflation: A continuing rise in the general price level is usually attributed to an increase in the volume of money and credit relative to available goods and services.
  • Nest egg: A sum of money you have set aside for the future.
  • Retirement age: The age at which most people normally retire from work, traditionally specified as age 65. Unfortunately, today full Social Security benefits don’t begin until age 66 but will rise to 67 for people born in 1960 and later.
  • Returns: The money you earn or lose on an investment.
  • Risk: The possibility that an investment will perform poorly or even cause you to lose money.
  • Short-term investment: This is an investment that can be easily converted to cash.
  • Tax-advantaged: When you get tax benefits from an investment account, like making 401k contributions from your paycheck before tax is taken out.

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