AARP’s Public Policy Institute recently published an interesting study which examines how effective online calculators are at helping baby boomers plan for retirement. The study found that while retirement calculators may help people estimate what they need to save in order to reach retirement, they rarely factor in paying for things like health and long-term care expenditures.
The study looks at twelve different on-line retirement planning calculators and found that all but two don’t take into account potential health and long term care expenses. So without factoring in that data in the calculations, the user will get a false picture of future spending needs.
While the study found the calculators were lacking in certain areas, AARP still thinks they provide a valuable service because many consumers would have difficulty replicating the programs’ calculations on their own. To help improve the calculators, AARP thinks they should:
- Use a simple but improved estimate of life expectancies (a pull-down screen with standard tables of life expectancy at age 65 for given years of birth)
- Include likely annual or monthly health care spending associated with Medicare medical and drug coverage, retiree health benefits, Medicare supplemental insurance, and private Medicare plans
- Include the need for and cost of long-term care services
- Adjust for age and gender
- Include family history of health care challenges