Online Calculators: Are They Useful Tools or Financial Malpractice?

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The truth is that for the most part, they are designed to sell you something under the guise of giving you peace of mind.  The truth is that you should have peace of mind if you followed the recommendations because you are most likely over-saving or over-insured.  Think about it for a minute.  Life insurance needs calculators are created by insurance companies and retirement savings calculators are created by companies who offer some form of investment or savings plan.

Life insurance: What is it that you are actually trying to protect?  It is your family's living standard in the event of your premature death.  If you over-insure, I guess it's technically not a bad thing for your survivors but, what could you have enjoyed while you were alive with the money you could have saved?

Retirement: The problem with over-saving is that you squander your youth pinching pennies and keeping your nose to the grindstone and then after you retire, you've got more money than you know what to do with and you've got 65 years of penny-pinching habits that you can't let go.

The bigger problem is what these calculators do for those who can't afford to save or insure at that level is that they simply do nothing to plan for the future.   The cost is prohibitive, they feel helpless, so they opt to do nothing when in reality, their living standard could have been protected possibly at a fraction of what the little 4 or 5 question calculator suggested for them.  (I'll save that for another post but, would you follow the advice of a professional who only asked 4 or 5 questions?)

Online retirement-planning tools can be useful, but only if you're careful