Special Report: Plan Your Retirement.com

This section was jointly prepared by the editorial staffs of PC World and New Choices: Living Even Better After 50 magazines.

Someday, when you retire, you will have plentyof time to explore the Web for hours, looking up everything from adventure travel to Zen Buddhism. But for now, take what precious time you can afford at your computer and use the latest electronic tools to plan for that blissful someday. It's quick and relatively painless.

Given the many software programs that also tap into a wealth of online information and the free Web sites that can calculate retirement expenses in minutes, flesh-and-blood financial planners must be shaking in their shoes. Who needs them anymore? In just one session with either technology, you can get an idea of how much money you'll need in retirement, plus how much you'll need to save to get there. More sophisticated programs can tell you exactly how to invest, how your pension will play out, and how much you'll spend on taxes.

All retirement-planning programs work basically the same way. You tell the program how much you think you'll spend in a year of retirement living; it factors in your life expectancy and then tells you how much of a nest egg you'll need in order to provide that kind of income for the rest of your life.

Next you tell the program how much money you've already saved for retirement and what benefits (such as Social Security and pensions) you expect to receive.

The program then calculates the gap between what you'll have and what you'll need--and tells you how much you should save annually to make up the difference.

But don't count on your computer to help with the hardest tasks of retirement planning: figuring out what you'll do when you're retired and then putting enough money aside to actually do it.

Before You Start

Your retirement-planning sessions will run more smoothly if you gather your financial data before you even turn on the computer. Here's some information you'll be expected to provide, and where you can find it.

*Your current income as well as what you anticipate your future income will be.

For example, do you get a 3 percent cost-of-living increase every year? Are you in line for a better job that will earn you another $10,000 annually?

*Your estimated Social Security benefit. Most retirement-planning programs will provide an estimate based on your income, but it couldn't hurt to get a personalized statement. Log on to www.ssa.gov to request one. Or just be patient: This year, the Social Security Administration begins sending estimates to most workers on an annual basis.

*Your current assets. Gather the most recent statements from your IRAs, company 401(k) plan, and regular investment accounts.

*The value of your home. Do you want to use your home as a financial asset in retirement, either by selling it and moving to less expensive digs, or by taking out a reverse mortgage to tap your home's equity while you still live in it? If so, you'll need a rough approximation of what it's worth in today's market.

*Your company pension plan. Will you receive monthly retirement benefits from your employer? Ask your human-resources department to estimate what those benefits are going to be.

The Best Retirement-Planning Software

Who wouldn't want a financial planner on his or her hard drive? With the latest generation of retirement-planning software, you can get pretty close. A good retirement-planning program will help you set a budget for your chosen retirement lifestyle, determine a savings goal that should get you there, and point you to the investment mix that makes the most sense for you.

Not surprisingly, some retirement-planning software packages are better than others. The best are somewhat conservative, according to Robert Wolfe, a certified financial planner and vice president at Compu-Val Investments, in Wilmington, Delaware. They don't let you assume you'll make 20 percent a year in the stock market forever, even if you happened to last year. They use realistic assumptions for your pre- and post-retirement tax rate, include state income taxes, and make distinctions between your tax-deferred savings and your taxable ones.

The best programs do even more, adds J. Michael Martin of Financial Advantage, in Columbia, Maryland. They force you to make a realistic determination of your post-retirement expenses--and not just throw a number like 75 percent of your current budget into the mix. They also allow you to plan singly or as a couple and to factor growth into the equation, expressing your annual savings needs as a percentage of your salary or as a dollar amount that rises with your expected earnings. Some programs will even connect you to a trove of useful information online.

Retirement-planning software can be divided into two basic types:

*Some packages--notably Microsoft Money and Quicken--are comprehensive checkbook, investment, and money-management programs that include retirement-planning modules.

*Others, more specifically dedicated to retirement planning, don't include day-to-day checkbook or similar features but may give you a wider choice of retirement-planning variables and may work faster.

Still, with numerous Web sites now offering free retirement-planning calculators of their own, you might want to know, who needs to buy software?

The answer: anyone who wants to plan with great accuracy and in great detail, revisit his or her plans again and again, or store intimate retirement data and calculations on a personal computer instead of on someone else's Web server.

Most of the software packages we list here are inexpensive. Some--Microsoft Money 2000 Deluxe and Torrid Technologies' Retirement Planner 99, for instance--offer free trial versions online. Here, in alphabetical order, are some of the best programs we tried out.

Financial Tools, Vorton Technologies, $20This isn't just a retirement planner--it's a set of financial calculators that lets you monitor your mortgage, check up on bond earnings, analyze loans, and more. Its retirement-planning module is a bit stripped down compared to the ones in other programs, however. For example, it ignores the tax aspects of retirement saving and spending. If you want a slew of financial calculators that go beyond retirement planning, such as tax and balloon-payment mortgage calculators, Vorton also sells a version called PowerTools for $40. (Note, though, that the retirement-planning module is essentially the same as the one in the cheaper program.) 613/721-1107; www.vorton.com; PRODUCT INFO NO. 669Kiplinger's Net Wealth, Block Financial, $30The program is slower than many competing products and its screen is busier, but this software does let you go online to tap a number of databases, and it offers one of the most thorough retirement-planning modules around. For example, the program integrates spousal retirement plans; provides separate treatment of Roth IRAs, 401(k)s, IRAs, and taxable investments; accounts for housing costs; and predicts your bottom line depending on whether or not you sell your home when you retire. There's a lot more, as well, on nonretirement issues like investment management and debt reduction. While the software comes with the Microsoft Internet Explorer Web browser, it does not work with Netscape Navigator. 800/235-4060; www.blocksoft.com; PRODUCT INFO NO. 670Microsoft Money 2000 Deluxe, Microsoft, $70This program allows you to track your investments and regularly check whether they're getting you closer to your retirement goals. It links to MSN MoneyCentral, Microsoft's Web site, which offers information about stocks and mutual funds, as well as financial news. The program's thorough what-if feature lets you jiggle your retirement-planning variables. Perhaps most important, it allows you to plan your retirement based on when you can afford it rather than when you feel like it. On the other hand, if all you want to do is crunch some retirement estimates, this program probably constitutes overkill. 800/426-9400; www.microsoft.com; PRODUCT INFO NO. 671Plan Retirement Quick & Easy, Individual Software, $20This one lives up to its name yet does not oversimplify. For example, you can include or exclude a spouse's financial data at the click of a button, plan in today's dollars while the program adjusts for inflation, build realistic tax rates into your estimate, separate taxable and tax-deferred investments, and change every variable to play "what if" games with your projections. Portfolio advice appears in colorful pie charts, and the program can link you to the Internet to get information on investments, health insurance, and places to retire. It cannot help you figure out precisely which investments to put your money in, however. 800/822-3522 or www.individualsoftware.com, PRODUCT INFO NO.

672

Quicken Deluxe 2000, Intuit, $60

The latest version of Quicken is a fully integrated, easy-to-use program that can help you manage every aspect of your financial life. In addition to retirement planning, it provides tax planning, day-to-day money management, and portfolio management that links with the comprehensive Quicken.com Web site.

And if you've gone as far as you want to by yourself, it will print a detailed report to take to a human financial planner. 800/446-8848 or www.quicken2000.comRetire Secure, PricewaterhouseCoopers, $15This one's fast and simple to use, but precise only to a point, mainly because it doesn't deal with taxes. Instead, it leaves it up to you to include them in your estimated expenses. On the positive side, it has a pleasant interface and lets you override its recommendations on everything from life expectancy to inflation. You can enter retirement expenses as a percentage of current spending or as a dollar amount. You'll quickly get some rough answers about whether you are on track. 800/422-5579, www.pwcfps.com;PRODUCT INFO NO. 673Retirement Planner 99, Torrid Technologies, $14.95This fast program attains its speed by eliminating much in the way of helpful directions or guidance. Its assumptions of inflation and investment returns are conservative (4 percent and 6 percent annually, respectively), while its tax-rate estimations are overly conservative (it uses marginal tax rates throughout instead of assuming that some of your income will be taxed at lower rates). Still, you can punch in a quick-and-dirty picture of your assets and expectations all on one screen and, in less than 5 minutes, get a nifty bar chart showing the results. Slide the cursor over the bar chart, and you can see exactly how much money you will spend and how much you will have left in any year of your retirement plan. 770/565-6405, www.torrid-tech.com; PRODUCT INFO NO. 674Retirement Planning Analyzer, T. Rowe Price, downloaded from Web site $10, by mail order $20This is probably the most sophisticated retirement-planning software on the market today. It differs from other programs in three ways: It can take into account multiple retirement plans and 401(k) matches that move to higher rates as you contribute more; it treats IRAs and Roth IRAs separately; and it offers the latest thinking on tax rates--for example, it suggests that many planners overstate the role of marginal tax rates on retirement income. Leaving nothing to chance, it concludes by helping you plan your portfolio (but only, of course, using T. Rowe Price funds). 800/541-8803, www.troweprice.com; PRODUCT INFO NO. 675How (and When) to Use Retirement SoftwareGarbage in, garbage out is an old saying, but still true. So try to be as realistic as possible about your expected company pension, post-retirement expenses, and current savings. If, for example, you're saving money to put your kids through college, don't count it as retirement money too. And if your monthly budget is now $5000, don't tell your software you're going to get by on $2000 a month once you retire. You won't.

Talk It Out

Use the results from retirement-planning software as a springboard for discussion with your spouse, if you have one, and your flesh-and-blood investment adviser. If the results say you have way more than you need (and on the heels of this raging bull market, many people do), maybe it's time to lighten up on the savings, and have some fun.

If, on the other hand, they tell you that you'll have to save 50 percent of your salary for the next decade or you're doomed, you'll probably want to make some changes in lifestyle or attitude. Maybe you should explore more aggressive investments. Maybe you need to curtail spending. The results you'll get from these programs won't make those choices for you, but they will lay them out for you with digital clarity.

Revising Your Plan

How often should you go back to these programs and redo your retirement plan?

As often as you want, if you enjoy it. More realistically, expect to perform a tune-up at least once every year on an updated version of the same program. Go back to the software more often, says Robert Wolfe of Compu-Val Investments in Wilmington, Delaware, if your situation changes in any major way.

The Best Retirement-Planning Web Sites

If you tried to visit all the retirement-planning Web sites, you'd probably be retired long before you finished your odyssey. Virtually every mutual fund, insurance company, and brokerage firm, as well as many financial publications, have such information available on their sites.

The best of these offer unbiased information about retirement planning, useful articles about the finer points of benefit plans and investment options, and convenient calculators. They give rough estimates of how to set and reach your goals, though not always in as much detail as the stand-alone software described in the previous section.

With that caveat, you can go pretty far on your own. Here are some standouts among the hundreds (probably thousands) of retirement-planning Web sites, listed in alphabetical order.

American Savings Education Council, www.asec.orgThis consortium of businesses and nonprofit organizations understands that sometimes you just want immediate gratification. Its calculator, Ballpark Estimate, takes less than a minute to give you a general idea of where you stand.

Financenter.com, www.financenter.com

Here you'll find ClikCalcs, the most comprehensive set of financial calculators on the Internet. You can get answers to everything from "How much insurance will I need?" to "Which IRA is better?" and "Should I buy or lease that car?"

Of course, a full complement of retirement calculators is included. Another plus: The site has no advertisers to slow you down. For anything besides calculators, however, you'll need to go elsewhere.

Financial Engines, www.financialengines.comThis relatively new but popular Web site, founded by Nobel Prize-winning economist William F. Sharpe, is more sophisticated and easier to use than most Web-based retirement planners. Type in your current retirement-savings mix, age, and estimated spending needs, and it will use cutting-edge economic modeling to assess your chances of meeting your goals. It will also analyze your 401(k) portfolio and give you advice about you whether or not you could do better by shifting investments. You can then use the site to monitor those investments and their returns against your goals. Employees of companies that subscribe to the Web site receive everything for free, and the program is also free to anyone who wants basic investment advice. Subscribers who want personalized advice must pay $15 for three months.

401Kafe, www.401kafe.com

This is the most informative site about 401(k) plans. Use it to learn how to make the most of the plan you've got, see what the state-of-the-art 401(k) looks like, or pose specific questions to Ted Benna, the man who invented the 401(k).

MSN MoneyCentral, moneycentral.msn.com

Microsoft's comprehensive financial-planning site is appropriately huge. You can use a fairly sophisticated retirement calculator, read page after page of background material (some of it contributed by site sponsors) on everything from annuities to wills, plan your retirement portfolio, and search for the best mutual funds based on fees, performance, or Morningstar ratings. Beware though: You can also get lost very easily.

Mutual Fund Education Alliance, www.mfea.comThis trade group of no-load mutual funds sponsors an educational Web site that is also a gateway to the participating fund families. It has its own retirement calculator, information about workplace retirement benefits, and articles, charts, calculators, and links to many fund companies. When you're ready to choose specific funds, however, you may want to go to a more full-featured investment site, as this one only recommends the funds of sponsoring members.

The Roth IRAs Web Site Home Page, Brentmark Software, www.rothira.comEverything concerning those new tax-free Roth IRAs is here, including links to hundreds of articles and calculators, the latest news from Washington on the subject, and help in planning how best to use the Roth. The average visitor, though, may find it a bit too technical.

Quicken, www.quicken.com

Intuit, the publisher of Quicken money-management software, has made its site the standard for comprehensive, coordinated, and interactive financial information. In addition to retirement planning, it includes links to investment products, those ubiquitous calculators, in-depth articles, and advice.

The Fund Companies

Most mutual-fund companies offer retirement-planning information on their Internet sites, but these four are standouts. All do basic retirement calculations and suggest investment strategies to get you to your goal. Of course, any fund company offering retirement advice is going to recommend its own funds for your plan.

* Fidelity Investments www.fidelity.com

* Strong Funds www.strong-funds.com

* T. Rowe Price www.troweprice.com

* The Vanguard Group www.vanguard.com

Financial Portals

If you want to know everything about saving and investing for retirement but don't know where to start, select any of the following full-service Web sites and click away. While the sites cover an array of topics having nothing to do with retirement planning, they nonetheless pull a lot of investment data onto their front pages and offer links to all sorts of other financial information.

* www.about.com/finance

* www.askjeeves.com/channels/money/pers.asp* http://finance.yahoo.com* www.investorama.com* www.investorguide.com* http://money.go.comThinking of Moving?

Retiring is not just about accumulating money. For some people, it's about finding a place with the perfect terrain, climate, and cost of living. These sites can help.www.homefair.com. A lot of calculators and resources, including a quick and easy salary calculator that will tell you how far your income will go in different parts of the country.www.relocationcentral.com. A complete source of relocation information, including state directories and links to city directories that provide information on everything from apartments to zoos.www.seniorhousing.net. A directory of retirement communities, assisted-living facilities, nursing homes, and more. This site has listings for every state and provides floor plans and links to many facilities.www.virtualrelocation.com. Includes cost of living databases for 500 cities as well as data on real-estate prices and taxes.

Investing for Your Retirement Online

If you're planning your retirement online, you might as well invest for retirement there. The advantages of this approach are clear. You can research stocks and mutual funds using a vast array of tools previously available only to financial professionals, compare your picks to other potential investments, conduct your trades, and get a better deal on commissions. Online brokers charge as little as $8 a trade, and even the more expensive ones give you a $10 or $20 break for doing your trade online. You can review your trade on your computer screen before you enter it, and see it executed before your eyes.

There are disadvantages, however. The biggest one is that such ease can make trading too tempting. If you've adopted a sensible "buy and hold" strategy, you don't need to trade very often, and doing so could blow your plan. That's why we have omitted sites that seem geared for people who want to play really fast and loose with their retirement money. Also, by the time you read this, you'll be able to try out Merrill Lynch at www.mlol.ml. com, which is supposed to have online trading for $30 a shot, as well as the sites of several other conventional brokerage firms that are eager to get a piece of the online business.

These are some of the better online trading sites that were available as we went to press:

DLJdirect, Donaldson, Lufkin & Jenrette, www.dljdirect.comDLJ is fast, and you can start trading almost immediately after you fill out an account form. But its very graphic interface can slow things down later.

Commissions start at $20.

E-Trade, www.etrade.com

E-Trade has become really popular really fast, despite a few publicized technical glitches and a site that requires more password usage and more clicking back and forth than many of its competitors. Account holders get $15 trades, a wealth of research data, and unlimited free real-time quotes. The firm offers a long list of no-load funds and its own brand of index funds.

Morgan Stanley Dean Witter, www.msdw.comThe first conventional broker to hit the Web with a site that offers three different levels of service, Morgan Stanley aims to please both do-it-yourself traders and customers who want brokerage advice. For $30 a trade, you can go online and buy and sell stocks of your own choosing. Alternatively, for a flat fee (2.25 percent of assets up to $250,000), you can get all the advice and research you want, including online or telephone trading. You can also use a traditional, commission-earning broker and just monitor your account online.

This site replaces what used to be Discover Brokerage, the $15-a-trade online site favored by that island-owning tow-truck driver in the television ads.

Powerstreet, www.fidelity.com

This is the new online brokerage arm of mutual-fund giant Fidelity Investments.

Its standard online commission of $25 for up to 1000 shares is lower than archrival Charles Schwab's (see below); if you make 12 or more trades a year, commissions drop as low as $15. Plus, you get buckets of research and many choices of no-load and low-load mutual funds and annuities. Powerstreet also allows you to customize the look of your home page with news, quotes, sports, and so forth.

Charles Schwab, www.schwab.com

The market leader charges $30 a trade and requires a lot of clicking to get you where you're going. But you'll find ample directions, in-depth research, charts, and other pluses. Another advantage, in case the whole site crashes:

The firm backs up its site with a vast telephone system and real bricks-and-mortar offices. It also has a comprehensive list of brand-name no-load funds that you can buy right on the site, as well as Schwab index funds, which boast some of the lowest expenses around.

TD Waterhouse, www.waterhouse.com

Commissions here start at $12, and the site offers lots of good research from Standard & Poor's and others for free. Also available: comprehensive mutual-fund screening tools and data on almost 9000 funds. It's relatively easy to make trades, but other aspects of the site can be difficult to navigate.

Should You Invest Online?

Investing online isn't for everyone--especially if it's your hard-earned retirement dollars you're playing with. Follow these guidelines to determine whether to use a cyber broker.

You may enjoy online investing if:

* You invest in individual stocks or a mix of mutual funds from several companies* You like doing your own research and making your own decisions* You're comfortable on the Internet* You make more than two or three trades a year* You don't care about talking to a real person when you conduct investment transactions* You like your commerce fast and cheap* You can be a disciplined investor despite lots of overstimulation.

You probably shouldn't invest online if:

* You are happy having a financial adviser make your investment decisions for you* Worrying about Internet security will keep you up at night* You invest with only one fund family and rarely sell or transfer money from one fund to another* You don't trust yourself not to trade more than you need to* You just know you'll become obsessed with checking your portfolio by the hour* You fear that retirement planning may turn into a video gameAlready Retired? Check Out These SitesIf you're already retired, you still need to manage your money, pay bills, and invest. In fact, once you're in the world of Social Security benefits, Medicare coverage, and retirement-plan distributions, your financial life may become more complicated, not less so. Some of the software mentioned earlier can help, especially Kiplinger's Net Wealth, Microsoft Money 2000 Deluxe, and Quicken Deluxe 2000. There are also a number of fast, comprehensive Web sites that can provide the information you need. Below are a few that we recommend you visit, listed alphabetically.

Consumer Information on Reverse Mortgages, www.reverse.orgThe National Center for Home Equity Conversion, an independent authority on reverse mortgages, hosts this comprehensive site. It tells you what you need to know to get cash out of your house without selling it.

Medicare, www.medicare.gov

This text-based Web site from Uncle Sam offers everything from generic wellness advice to an interactive database that lets you compare the Medicare HMOs in your area. It also includes general information about the Medicare program, Medigap insurance, and phone numbers to call when you have questions or concerns about your benefits.

Retirement Income Calculator, www.waddell.com/inc_ill.htmlThis useful calculator from mutual-fund firm Waddell & Reed takes just a minute to learn. Unlike the calculators mentioned elsewhere in this section, which focus on building up your stash, this one lets you estimate how long your money will last under different withdrawal schedules.

SeniorNet, www.seniornet.org

If some training would help you take better advantage of all the information on the Web, this might be the first place to go. SeniorNet is the premier site for computer learning for anyone over 50. Find the answer to your computer question here, or the location of the learning center nearest you.

The Social Security Administration, www.ssa.govThis fast, easy-to-navigate site will tell you more than everything you always wanted to know about Social Security benefits and programs. Even after your checks start coming, you'll find the site useful for information on such topics as how a part-time job can affect your benefits.

T. Rowe Price, www.troweprice.com

This mutual-fund giant, discussed earlier, is one of the few to provide comprehensive planning and savings advice for retirees. You can order a free copy of its workbook, "The Retirees Financial Guide," at www. troweprice.com/mutual/troweMutual InfoHome.html. You can also pick up basic advice on retirement, IRAs, and investing.

Uncle SamAccess America for Seniors, www.seniors.govThis site pulls together information on all government programs related to older Americans in a quick, easily accessible format.

Linda Stern is an award-winning personal-finance writer who specializes in retirement topics. Her work also appears in Newsweek and Family Money.

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