The mathematics behind retirement calculations may give them the aura of a science, but retirement planning is unquestionably an art. The purpose of doing the calculations is to decide what you can do today to make your later years more financially secure. No matter what type of calculator you use, your results will be estimates, not bankable facts. Make your estimates as accurate as possible by avoiding these five basic planning errors.

Assume 4 percent inflation when you do your calculations, but keep in mind that actual inflation may be much different. Inflation affects the cost of what you buy as well as the annual cost-of-living increases you’ll see in your Social Security or pension check. Depending on what you buy, your expenses may increase faster than inflation. For example, regular household expenses may increase with inflation, but health-care costs may increase faster. If you have higher medical expenses than the average person, you may find your expenses will increase faster than theirs.

Allowing for increasing medical costs in retirement is difficult. One good way to account for this problem, if the calculator you’re using allows it, is to assume smaller increases in Social Security and pension income than your estimate of expense inflation. If you assume 4 percent inflation, assume 2 percent annual growth in Social Security income. This change will put pressure on your nest egg to grow large enough to cover expenses later in retirement because your model Social Security and pension income won’t quite keep up.

Retirement calculators often suggest using historical economic returns for your portfolio. Making this assumption may cause you to underestimate the true amount of money you need. In fact, future returns may not be as high as past returns. Investment returns are linked to the inflation rate, so you’ll be safer to assume a return no more than 3 or 4 percent greater than you use for inflation. If you assume inflation to be 4 percent, at most you should project for a portfolio return of 7 or 8 percent.

Investing costs can reduce your annual returns by 1 percent or more. These costs might be the annual expenses and sales charges in your mutual funds or the commissions paid on stock or other exchange transactions. The historical returns listed in retirement calculators are usually the returns of economic indexes like the S&P 500 or the MSCI EAFE Index, which aren’t investments themselves and aren’t affected by the costs your actual investments have. Check your total return assumptions against your actual portfolio performance—after accounting for expenses—to see whether your return projections are reasonable. If you’re projecting a 7 or 8 percent return and want to account for investing costs, expect 6 or 7 percent returns.

Even if you don’t think you’ll live to age 95 or 100, plan like you will. Planning for a long retirement is a good way to build a little extra into your target nest egg to make up for slower portfolio growth or higher inflation. You can see the effect of life span on the necessary size of your nest egg by running the calculator a few times using different ages. Adding five years makes a big difference. You can earmark this extra set-aside for medical expenses or long-term care expenses if you need them. If you try projecting to these older ages and your nest egg is coming up short, but you still feel you won’t live that long, add an assumption into your plan for a part-time retirement job at the start of retirement or plan to sell your home and downsize at a very old age. Adding the home equity to your nest egg as you age may more accurately project what you may actually do and make your calculations more realistic.

Just because you’re retired doesn’t mean all those extra expenses you have now will stop happening. Leave room in your projected budget for big-ticket items that you’ll still need to buy. If you’re planning 30 years in retirement, you’ll probably need to buy two, if not three, cars over the years. Your home will need maintenance and probably design updates. (You don’t want to be the lady with the equivalent of the 1970s orange shag carpet in the living room, do you?) Medical emergencies and other unexpected expenses will still happen in retirement, just as they do now. When you input your projected annual—or monthly—income needs into the calculator, consider the average costs of these things into your budget. Don’t assume that you’ll be able to spend your entire monthly income each month and won’t need to save for these nonmonthly items.

The common assumption that taxes will be lower after retirement is based on the mistaken premise that, because you’re not earning income, you’ll pay less tax. This isn’t likely to be the case. Many economists warn that tax rates will increase in coming years to cover the costs of the baby boom generation retiring with government benefits and to help pay down government debt, among other things. If your nest egg is invested in tax-deferred retirement plans, you’ll owe income taxes on your withdrawals just as you do on your wages now. Run the calculators using the same tax rate you pay now to avoid underestimating the nest egg you’ll need later on.

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