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Online Financial Calculator

Can you trust the online financial calculators?

by Holistic Leave a Comment | Filed Under: Financial Plan

Yes, it is true that financial / retirement calculators are simple to use. Based on a few assumptions that you input on your computer about the future, it instantly provides you with a number that indicates how much one needs for his/her retirement.

This calculation might appear accurate to you in terms of scientific and mathematical terms. However, when you move deeper into it, only then you find its flaws. It is when you input the wrong values for the assumptions that are impossible to make, then the results will be dangerously wrong, posing a real threat to your retirement security.

Agreed that financial / retirement calculators can prove to be really valuable tools when properly used.Therefore, their use is not completely opposed, but at the same time, we must prevent their highly frequent misuse.

Time and again, we hear people risking upon their future savings on assumptions based on false output, with no chances of accuracy. We tend to get misled by the scientific cover surrounding these calculators.

Its output is just as accurate as the assumptions that one input. Even just one mistaken assumption could very easily double your estimated amount. This can leave one financially exposed, and that too when he can afford it the least.Let us explore more about these financial / retirement calculators, their working and limitations, and a proper solution that one can see and apply to this tool appropriately.

1.Working:

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Sometime in life, one may worry about his income post retirement. Financial / retirement calculators, use a simple algorithm for projecting your investment growth and expenditure in the future. This will be based on a required set of assumptions that you have to input.

All calculators are based on the same set of assumptions. These include the your life expectancy, your age of retirement, return on investments, inflation, portfolio size, and expected

expenses. Others may require more or less information depending on their composure style.The point we want to convey is that ‘math will always be math’.

There is no customisation possible.
How do you account the variable pay?
How do you give provision for your existing savings/investments?
How do you accommodate the ESOPs you receive?

Your life goals will not just fit into a financial calculator. It needs a lot of customisation. You are so unique.

2.Assumptions:

This is the most critical factor for determining the precision of your retirement estimate. Let us consider the example of investment return assumption. Our traditional wisdom says that our future returns will somehow relate to the returns we have received in the past.

There can be a lot of variation on this, but the differences have remained less significant than the similarities. Therefore, the results produced will be slightly different with each variation. None of these financial / retirement calculators actually provide different assumptions when input with similar assumptions.

If the future returns on investment simulate the past, there can be chances for them to be correct. The reason being their basis on similar assumptions.Whereas, if future returns are significantly different from the past, then they all could be incorrect no matter how they appear from outside.It may sound a little satirical, for one to comprehend. These assumptions and not the calculator are, therefore the key to estimate your needs for retirement. Do you wonder why? It is because these assumptions are what compounds or multiplies, to determine your result.

A calculator can suggest a range to assume. But it doesn’t have wisdom to suggest the right range for your personal situation.

3.Longevity:

Do you know when are going to die? Planners just adjust this up/down based on their personal health and family history. However, this is something that is unknowable, and just a matter of guess.Using math tables for estimating life expectancy is a centrally flawed assumption. It is a completely hypothetical approach.

Moreover, longevity has increased by almost 100 days per annum for the past century. This result adds 30 more years to one’s life expectancy in the last 100 years. It is a moving target that is growing regularly.In addition, the expectancy of life today can not at all, be used for forecasting the same in the future. Without any scientific validity to this approach, yet it is an industry practice.

The fact remains that determining death rate is a complete guess work because nobody surely knows about it, and nobody ever will. Longevity thus cannot be an accurate estimation.

A financial planner can make some realistic assumption based on taking some real life input from you like the health history, family longevity history, lifestyle and its impact on the health…

4.Expenditure:

How accurate do you consider the assumption of 80% of your pre-retirement income sufficient for post-retirement expenses? Debatable subject, it is.Post-retirement you won’t be travelling for work, or spending money on office clothes. Moreover, you will not save for any further retirement plans, vanishingone more cash outflow source. You might plan to live a more luxurious life after retirement, but studies show spending on lifestyle usually tends to reduce, owing to one’s declining health.

The most feasible solution is formulating your own budget, based on your plans, and guess estimates. This is a completely different choice for every individual. Therefore, it is best to have your unique plan for retirement, although not accurate, but a better choice for this assumption.

5.Inflation:

This is a totally absurd assumption. The major factor being that one cannot determine inflation for 30+ years in the future, with any degree of precision or accuracy. That is kind of impossible, as large changes between now and then, will create unforeseeable circumstances to determine results.

Small changes in inflation can produce huge changes occurring in your retirement savings, because of their compounding effect. Thus, even a little error can have a making or breaking effect on your fiscal security.

The inflation factor is the only biggest threat to one’s retirement, as it can never be estimated with accuracy, and its effects can magnify even small errors into big troubles.

Your personal inflation is different from the inflation of the country. How that inflation needs to be hedged in the plan is something a calculator can do.

6.Returns:

This is important for your retirement security as this is also a compounded result. Retirement security is dependent on what happens in the coming 15-20 years, not the last. Long term analysis can be risky, as it hides the periods of flat or negative returns. Rather than relying on long-term analysis, a more reliable approach to follow is: estimation of future returns based on the current valuations.

A financial planner will make realistic assumption on the returns based on a worst case scenario approach which will help you reach the goals safer and surer.

Your financial plan is directed towards achieving your life goals. You can’t rely on a life –less financial calculators to achieve your life goals. If you want to check our own distinctive complete and comprehensive financial planning process will be suitable to you or not, then you may register for

If you have any comments or questions, write them in the comment box below.

Or are you interested in creating a Comprehensive Financial Plan for your financial goals?

Skip the queue by registering for your 30 Minute FREE Financial Plan Consultation. Click the ‘‘BOOK YOUR SLOT NOW!’’ button below. 

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Jey S
Jey S
24. September, 2021.
I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
I was about to retire and really not understanding how to invest money to have financial freedom and fulfilling my goals. Was desperately searching on internet way out and fortunately came across Holistic Investment Planners. I read number of articles on their website and realized that this is the agency which I want and engaged their services for my retirement planning. It is an excellent experience to be associated with Holistic. Right from day one our interaction was fantastic and they gave me such a wonderful plan that I had never imagined. I am fortunate enough to be in the client list of Holistic. I have recommended Holistic to my friends as well.
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Lionel Faber
16. September, 2021.
I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
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Sridhar
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Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
Swetha Vasanth
6. September, 2021.
This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
Srinvas Kannan
Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
3. July, 2021.
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Nellai B
26. June, 2021.
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