Retirement planning is a complex topic. It's complex enough that is has spawned an entire field of investment advice full of professionals who work on retirement planning day in and day out. If you are just getting started with your retirement planning, or if you hoping to re-evaluate and update your existing retirement plan, then it can often be difficult to know where to start. Fortunately, there are tools available that can help you to get started. Even better, many of them are free. If you haven't used retirement software in the past, this article will help you to understand some of the benefits that it can offer.

Software Can Offer More Than Just Static Projections

If you have a single retirement account or a small number of retirement accounts, then you may have made use of Excel or other spreadsheet software to project your contributions and gains out to retirement age. This can be effective to provide you with some baseline information, but it is inherently limited and assumes that your financial situation will not change. It also offers you little in the way of actionable advice. While you can see if your current trajectory is inadequate to meet your goals, it is often not clear why that is the case or what you can do about it.

Retirement planning software allows you to use a technique known as a Monte Carlo simulation to run more than simple, static projections. These simulations project your earnings and retirement expenditures while altering a wide range of variables to provide you with drastically more information. This can help you to see how your current retirement strategy fares with many different options for portfolios, varying market conditions, and fluctuating contributions.

You Can Gain a Better Perspective on Taxes

Many retirees underestimate their tax burden once they retire or fail to understand how their assets may be taxed even after they are done working. You can avoid this by using software that provides tax information to see how your yearly withdrawals will be taxed and how those taxes will affect your overall ability to pay your expenses throughout retirement. While you can calculate this information on your own, having detailed information will better allow you to take steps before retirement to prepare.

Visualizations and Charts Aren't Just for Show

Most retirement software packages offer a variety of charts and other visualizations to help you see how your retirement contributions will progress over time and how they will be affected by changing conditions or altered plans. While this may seem like unnecessary, having this data in front of you in a visual form can make it much easier to parse and understand. Rather than simply pouring over figures that can be difficult to make sense of at a glance, you can immediately see the effects of any changes that you may be considering. This can be a huge boon if you are considering adding new investments or changing your contribution amounts.

Ultimately, retirement planning software is another tool in your retirement planning arsenal. It is not necessarily a substitute for speaking with an adviser, but it can help you to better understand your financial situation and see where changes may be necessary to achieve your goals.