If you are planning to call it a career soon or are already retired, you might figure that the retirement planning software lining computer store shelves would provide savvy advice about ways to make sure your stash does not expire before you do. Boot up one of these programs, though, and you'll see that they are designed to help the younger set invest for their future retirement, not to assist older investors manage their money in retirement.
Fortunately, there are two inexpensive software programs that address retirees' needs effectively: the recently released Vanguard Retirement Manager ($29; 800-950-1971; CD-ROM or floppy disks; Windows 3.1 or higher, or Mac) and Quicken Financial Planner ($39.95; 800-624-8742; CD or floppy; Windows 3.1 or higher).
Clearly the superior of the two, Retirement Manager lets older investors grapple with such key issues as adjusting the size of withdrawals from their retirement accounts based on likely future returns. A handy 300-page guide that comes with the software provides counsel on a multitude of retirement issues, including whether you should start collecting Social Security now or hold off till later. Much of Retirement Manager's investing advice revolves around Vanguard's family of 92 no-load mutual funds. But the information was helpful and accurate, not just an excuse to push Vanguard funds.
Quicken Financial Planner, on the other hand, wasn't designed specifically for retirees. Nonetheless, it too does a commendable job helping retired investors budget and invest. And it's somewhat easier to navigate than the Vanguard program. For example, a quick click of the mouse lets you switch back and forth from the software's expense and investing sections. Retirement Manager makes you backtrack to the main menu before you can jump to another section.
These programs are especially beneficial for the three financial moves that can let you shrewdly manage your money in retirement.
Making detailed retirement income and expense projections. Retirement can cause enormous shifts in your expenses and income. Both Retirement Manager and Quicken Financial Planner help you plan for such changes by letting you set up detailed pre- and post-retirement entries for income, investment payouts, taxes and other expenses. Example: You can tell the programs when your mortgage will be paid off, and they will automatically eliminate the payment when figuring future cash flows. A seemingly minor detail like this is critical in helping you gauge how long your money will last.
Both packages also allow you to factor in a rising income stream if your pension is indexed to inflation -- or a drop in payments if you will get a reduced pension benefit after your spouse dies.
Investing your retirement money to lower risk and boost returns. Both programs suggest ways to divvy up your assets among stocks, bonds and cash equivalents based on your age and risk tolerance. But Retirement Manager also uses charts to illustrate how your portfolio would become riskier or more stable as you vary your investment mix. Retirement Manager also lets you calculate how long your retirement stash would last under different market conditions, assuming you continue to make constant annual withdrawals.
Dealing with the IRS' withdrawal requirements for retirement accounts. Starting in the April after you reach age 70 1/2 , tax law requires that you start pulling money from tax-deferred retirement plans such as your 401(k) and Individual Retirement Accounts. (Beginning in January, you can defer withdrawals from your 401(k) if you continue to work.) That may sound simple, but it's not. For example, to prevent you from racking up tax-deferred gains indefinitely and passing the benefits along to your heirs, the IRS demands that you withdraw at least a minimum amount each year. Pull out too little, and you could face a 50 percent penalty on the amount of the shortfall. Take out too much and you could face the so-called success tax, which is a 15 percent levy on yearly retirement distributions over $155,000. Retirement Manager and its accompanying book help you weave your way through the maze of tax regulations. Both programs say they will offer free or low-cost updates to reflect recent tax-law changes.
By prodding you to plan for important retirement budgeting and investing decisions, these two programs can help you squeeze more income out of your retirement savings.