Want a Happy Retirement? Don't Just Guess About What You'll Need

Recent research from the Employee Benefit Research Institute confirms what you probably already know: Retirement planning isn't something you can successfully leave to guesswork.

In its research, EBRI found that people who either used online retirement calculators or who worked with financial advisers were far more prepared to have a successful retirement than those who didn't. On the flip side, those who relied primarily on guessing at how much they'd need to cover their expenses wound up far worse prepared for their retirement than the typical person.

At Least Someone Has Contemplated Your Retirement

Intuitively, that makes a ton of sense. Your paychecks stop in retirement, but most of your expenses won't. Indeed, some of your costs -- most likely health insurance -- may well go up once you leave your employer. If you don't have a good handle on what all of your costs will be, you won't be able to adequately prepare for them.

Working with a professional or an online calculator helps in large part because an expert somewhere along the line has already thought about just about everything that goes into a typical retirement.

Those expenses can be estimated, tallied, and totaled. And with those cost estimates in hand, it becomes a straightforward math exercise to figure out how much someone needs to have saved.

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Of course, you'll have to add in some fudge factors, because you can't know how long your retirement will last, and because any future expense estimate is just that -- an estimate. But still, once you have a solid framework for your expenses, the bucket of money you'll need to cover them becomes far clearer.

And speaking of that bucket of money, once you know how big it has to be, figuring out how to accumulate it will largely be driven by estimates on your savings levels, rates of return, and time. Once again, a calculator -- whether run by you yourself or by a financial adviser you hire -- makes it fairly straightforward to figure out what you need to do to get there. The rest is largely a matter of regular review and course corrections, aided, of course, by either your or your planner's retirement calculator.

Which Is Better: Working Alone or with an Adviser?

There's good news for the retirement planning do-it-yourselfers out there. According to the EBRI's data, those who took charge of their own retirement and planned for it on their own with the help of online calculators were generally better prepared than those who used a professional adviser. That held true across all family statuses and income ranges that the EBRI considered.

Still, just like many people need to hire a personal trainer for the encouragement to exercise, other people may need to hire a financial adviser for the encouragement to invest for their retirement. Just beware that every dollar you spend on an adviser -- either directly or indirectly through money the adviser gets paid for selling you products -- is a dollar you can't invest. That dollar also won't compound on your behalf, making it that much tougher for you to ultimately reach your retirement goal.

Nevertheless, you're still far better off putting something away for your future than not investing at all, even if your overall returns aren't the greatest. If it takes prodding from a financial adviser to get you moving on a reasonable plan, that's still leagues ahead of where you'd likely get from mere guessing.

Stop Guessing, Start Doing

If you've never used an online retirement calculator before, now is the absolute best time to take a few out for a test drive. Since time can be the most powerful weapon in your retirement arsenal, the sooner you get moving, the better off you'll be.

The three links below are to different free calculators, any of which will help get you in the ballpark of where you need to be to have a successful plan:

• AARP -- Very simple and straightforward, with inputs and results graph on the same page.

• CNN Money -- Good balance between entry effort and results. Big benefit: It shows you the odds of your plan succeeding, rather than just assuming you'll hit your targets.

• E$P Planner -- Very comprehensive, but takes a long time and requires a lot of inputs and reading.

• DailyFinance retirement calculators -- This suite of calculators helps you home in on retirement savings specifics, such as which savings account should be tapped first in retirement to the effects of tax law changes and inflation.

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