The oldest members of the baby boom generation turn 65 in 2011, so it comes as little surprise that retirement concerns are on their minds.

According to one survey released in late 2010, almost a quarter of Canadian boomers are worried they haven't put away enough to see them through their retirement years.

You've heard the grim stories. Senior citizens who can't afford to eat well, or travel, or live in their preferred retirement home, or generally enjoy life the way they'd expected to. "This won't happen to me," you say.

But then the self-doubts creep in.

You hear that you'll need to accumulate $800,000 before you can afford to retire. That's when you spring into panic mode.

For many, the first stop will be the web, and the many online retirement calculators that reside there.

These easy-to-use tools are designed to provide some answers to the biggest questions people have in their pre-retirement years:

  1. How much money will I need to have at retirement?
  2. How much do I need to save each year to meet that goal?

Retirement calculators are designed to answer one or both of those key questions. But how best to use them? And which ones?

A Google search for "retirement calculator" produces a staggering 2.9 million results. Try a few to get an idea of where you stand now, and whether you're likely to reach your retirement savings goals given the personal data you enter. If the calculator you've selected asks about your Roth IRA or 401(k) plan, you're using an American calculator. This is one time when you definitely want a Canadian perspective.

Most of Canada's big financial services organizations have at least one retirement calculator attached to their web sites, as do some government bodies. Throughout this piece we'll point you to some of those calculators as well as some other web-based sources.

Here are a few tips to guide you in your journey through a very crowded field:

Be realistic in your projections

This is the most important advice that retirement consultants give to people who plug into retirement calculators. As you make your way through the questions, many calculators will ask you to enter the performance you expect from your investments, both before and after retirement. Be conservative! Many Canadians expect their RRSP investments to earn double-digit returns, year after year. The experts say this is too high. Most pros (and the better calculators) will recommend you enter from six to eight per cent.

When you're asked to estimate the future average annual inflation rate, aim high. It's negligible now, but has historically been something that needs to be factored in. Many calculators will suggest 2.5 or three per cent. The Bank of Canada has a great inflation calculator which provides an eye-opening, long-term perspective on the CPI and shows how escalating prices can devastate purchasing power over time.

Assume that you'll live to age 90

Many web sites offer life expectancy calculators. They're fun to fill out but can spit out wildly varying results. It all depends on the questions being asked. But whatever the results, understand what the answers mean. If a calculator tells a 40-year-old man that he can expect to live until he's 78, it doesn't mean he should plan his retirement finances as though he were going to exit this earth at 78. Mortality tables provide the median life expectancy. That means that half of all men who are now 40 will live beyond 78. Half will not make it to that age. Be optimistic. Assume you'll make it to 90. Great news if it happens. But it does mean you'll need to save more.

Assume that you'll live a busy, active (and therefore more expensive) retirement

If you think retirement means just sitting in a rocking chair and sipping tea, you haven't seen today's seniors. They're the healthiest, most active over-65 set ever. And leisure time costs money. Golf, travel, having a second home - all expensive propositions. So when your retirement calculator asks what percentage of your income (in today's dollars) you hope to retire with, ask yourself how much lower your expenses will be in retirement. Many calculators will suggest you enter a retirement income goal that's 70 per cent of your pre-retirement income. Some experts say you may be able to get by with as little as 50 per cent. After all, you won't be contributing to your RRSP any more, the kids will be on their own, you'll be in a lower tax bracket, and your home will likely be paid off. But if you're not in that camp, you'd better raise your retirement income assumptions. 

Be aware of the questions the calculator isn't asking

Some calculators ask just three or four questions. They're quick to fill out. But they won't give as complete a picture. Some calculators, for example, don't ask about the current value of your RRSPs. Others don't ask about company pension plans. And many retirement calculators don't take into account income from investments made outside RRSPs.

That's why we like retirement calculators that take into account newer financial realities like the tax-free savings account. offers one such calculator. We also like that it suggests that your expected annual investment returns after you retire may be lower than before retirement.

Some calculators don't adequately take into account government programs like the Canada Pension Plan and Old Age Security. For current CPP and OAS maximum benefit rates, you can check out the Human Resources Development Canada site.

Some calculators don't give you the flexibility to figure out the difference between taking your CPP retirement pension at age 60 or waiting until age 70. By the way, don't believe people who tell you not to count on the Canada Pension Plan for any retirement benefits. The CPP will be around when you retire. In July 2009, just a few months after the stock market crash, Canada's chief actuary said the CPP is sustainable for the next 75 years. If you paid into it, you'll get something back.

The longer, the better

A few web sites offer two retirement calculators β€” a short one that takes a couple of minutes to fill out, and a longer one that takes 10 minutes or more. Try both and see the difference the extra few minutes makes.

Some calculators warn that it will take 30 minutes to use them. Great! The more questions they ask, the better. The federal government's Canadian Retirement Income Calculator is a gold standard in the field. Its detail about the various income security programs can't be beat. For those with a pension plan at work, it has a good list of pension-related questions to ask your employer.  

Some web sites offer several retirement-related calculators to address specific aspects of retirement. Fiscal Agents, an independent deposit broker, has five retirement calculators on its web site. Its How Much Should You Be Saving For Retirement Calculator was adapted from the best-selling book The Pension Puzzle. Among other highlights, this calculator lets you account for earnings from part-time work after you've retired.

Don't confuse the message with the messenger

If the calculator on the Acme Financial Institution's web site suggests that the best way to make up your projected gap in retirement savings is to buy Acme's mutual funds, the warning bells should be sounding. There are plenty of ways to save for retirement, both inside and outside an RRSP. Independent financial advice may steer you in directions that would be far more appropriate for your situation than Acme's mutual funds.

Getting unbiased advice about retirement is critical. That's one reason we like the retirement info provided by the Investor Education Fund β€” a project funded by the Ontario Securities Commission. Its retirement calculator is a basic one, but we like its upfront reassurance that it doesn't store any of the personal financial data you enter. 

Be aware of a calculator's limitations

Retirement calculators are just interactive computer programs. They won't tell you what to invest in. They won't determine your risk profile. They won't offer tax advice. They won't suggest ways of income-splitting with a spouse. They won't advise on whether you should take your CPP at age 60, or wait until 65 or 70. These are areas where professional financial planning advice can come in handy. Advocis, the Financial Advisors Association of Canada, has an online list of its members, along with some questions you should ask anyone who wants to manage your finances.

Don't forget to act on the calculator's answers

Calculators can be great motivators. But they can only do so much. If the calculator finds that you're more likely to face a hand-to-mouth retirement than the comfortable retirement you were hoping for, then you (and only you) will have to do something about it. Consult a pro, buy a retirement planning book, visit your bank manager. Just do something!

If there's one thing retirement calculators all show, it's that time can be a real enemy. Delaying any retirement saving until you're 60 is just asking for trouble. Start saving when you're 35, and suddenly your job becomes a lot easier.