INGYourNumber Review

As a last minute addition to my series on calculating your retirement number I’d like to throw INGYourNumber calculator into the mix. Chris Thilk from ING was kind enough to leave me a post regarding this calculator.

I’m a big fan of ING when it comes to savings and checking accounts. Although I don’t currently have any accounts with ING or any affiliation whatsoever, they are frequently at the top of the lists circulating the blogosphere when it comes to banking options and features for those of us trying to improve our financial position. In fact I posted this article recently, and two of four recommended lists have ING at the top.

The INGYourNumber site has a retirement savings calculator that would fall into the “basic” category based on my current series. The calculator has two interfaces, one with full audio and hand-holding necessary to answer eight questions about your retirement plans. There is also a “quick” interface using a link towards the bottom of the screen or those of you who are impatient.

The calculator asks six simple questions and then generates your required savings target to retire. The questions are:

• your age (I used 33)
• married (yes)
• gross income (50,000)
• retirement age (67)
• desired annual income at retirement (40,000)
• “provide income through what age” (95)

I answered the questions with the values in brackets above, and received the answer of $855,454. There’s also an interesting u-tube video at the link below that shows some Georgia marathon runners carrying their numbers. The thing I found most interesting is that almost all of the numbers were in the 1-2 million range, except for one (which was at 911,000). Isn’t anyone trying to live a frugal lifestyle these days?

http://www.youtube.com/user/INGYourNumber

Geek Time: O.k. It’s geek out time. This calculator estimates the savings amount you will need at retirement. Therefore, based on this result, the calculator doesn’t actually need to know your age, whether you are married, or your current gross income. Although it’s possible that the calculator could guide you if you enter suspect values, I doubt is does this (I didn’t try it). Therefore these three questions are just for ING data mining purposes only and are probably not used in the calculations.

Overall I think this calculator is a good one and is worth a look. The only downside I see is that the basis for the calculation is not given. What does the calculator assume for a rate of return? Does it adjust for inflation or not, and if so how much? I did my own mathematical analysis on the results and my inputs, and it looks like the ING calculator assumes a modest 2% real rate of return (”real” meaning after inflation). This is a conservative estimate, but I’m conservative, and you should be too when you get to your retirement age!

Based on the result, this calculation is very similar to the “20x rule”, which is my name for a retirement estimate rule of thumb. The 20x rule says that you need to save 20 times your desired retirement pre-tax income. If you need $40,000 a year in retirement, you need to save $800,000. Need $60,000? That will cost you $1,200,000 when you retire. The 20x rule is a good starting point, and it assumes a 5% rate of return. If you want your income to adjust with inflation, you’ll need to earn a 5% real, or after inflation, rate of return (i.e. 8% if there is 3% inflation). If you don’t need your income adjusted for inflation, a 5% (nominal, or pre-inflation) rate of return will suffice.

Summary: give this calculator a look, especially if your looking for an easy interface and haven’t yet thought through your retirement plans enough to tackle a more involved calculation!

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