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The Perils of Retirement Calculators

Wednesday - 4/10/2013, 4:00pm  ET

Planning for retirement is one of the hardest money issues people face, as the uncertainties of dealing with a goal that's years or even decades away are hard to navigate. In this edition of our Motley Fool Conversations series, Fool personal finance expert Dayana Yochim and retirement-planning analyst Dan Caplinger discuss retirement calculators and the ways that many people use them to try to find some answers to their questions of how much to save and how to invest.

Dayana notes how retirement calculators allow you to run any number of scenarios to help you plan your retirement. But as Dan points out, the to-the-penny answers that retirement calculators produce don't accurately reflect the bumpiness of real-life investing results, which inevitably include bumps and dips along the way.

The key to using retirement calculators well is to maintain the flexibility to deal with changing circumstances. Dan and Dayana bring up a number of areas where staying flexible can help, including how much money you spend from year to year, when you plan to retire, and how you invest. Taking advantage of opportunities to phase into retirement through part-time arrangements can give you extra income to help you bridge the gap to get more financial security.

Finally, Dayana and Dan discuss various investing ideas. Although many retirees have traditionally turned to bonds, stocks of companies that enjoy stable customer demand and pay healthy dividends are a good choice. Yet to provide long-term growth for retirees who expect to live 20 to 30 years beyond their retirement date, growth stocks can be appropriate even if they don't pay dividends. Dan names some stocks in both categories and concludes that the right balance will let you keep your bases covered. is a good example of a growth stock, and even though it pays no dividend, it has plenty of future potential for further gains. The Motley Fool's premium report will tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon. The report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.