Retirement planning calculators are used by professionals for basic and complex calculations. They have special functions and keys to figure out calculations in terms of loan information, return on investment, taxes and more. Not every retirement planning calculator is similar but most of them have similar functions.
Retirement Planning Calculator Uses
Retirement planning calculators are used for basic and complicated calculations. They are very beneficial to reduce long hours of computing different information. Most of these calculators are used for:
- Calculating interest rates
- Calculating taxes
- Calculating loan payments
- Determining ROI
Using a retirement calculator is helpful when you want to set retirement and savings goals.
Retirement planning calculators have special keys that you need to be familiar with. These keys are normally abbreviated. Here are the special keys that a financial calculator has:
|N||Number of Payments|
|PV||Present Value/Loan Amount|
Retirement Planning Calculator Functions and Calculations
Excellent retirement planning calculators provide basic and complex calculations. Some common calculations include time value of money, depreciation, and amortization, break even and cash flow.
- Time Value of Money (TMV)
TMV is a very essential component when it comes to finance theory. Investors usually use TMV calculations for them to determine the profit to be gained by a given interest over given time. Present and future values are keys used in figuring out TMV.
Depreciation means the decrease in the value of tangible assets. For instance, a car can be a depreciating asset. It can also mean the cost allocation of assets. The normal way of calculating depreciation is through dividing the cost of the assets by the life of the assets.
Amortization means the decrease of amounts over a certain period. It can also refer to payments of debts and the spread of loan payments over a period of time. An example is a regular mortgage payment leading to the decreasing amount of the principal loan amount. Amortization also means reduction of capital costs. It generally refers to the intangible assets.
Business owners are required to forecast sales and costs. This requires them to do break-even analysis. When a company reaches BEP or the break-even point, costs and revenue are the same. The formula for break-even analysis is BEP = Fixed Cost / Unit Selling Price – Variable Cost. This is generally programmed in a retirement planning calculator.
- Internal Rate of Return
Internal Rate of Return or IRR compares and measures profitability of investments. It’s also commonly known as Discounted Cash Flow Rate of Return (DCFROR) or Rate of Return (ROR). It’s mainly used for capital budgeting. Calculation is rather complex without the help of a calculator.
Retirement planning can be a very complex and frustrating process for someone. The use and help of a retirement calculator can help you to figure out information that you would not be able to gain without it. Retirement planning companies are an even more helpful resource than calculators.
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