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Investment Savings and Distributions
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Use this calculator help you determine how long your investment savings might last.
Enter your current savings plan in the contributions section of the calculator,
and your withdrawal needs in the withdrawal section. This calculator will then plot
your investment savings total year-by-year. You can then determine how much your
investment savings could be worth, and how long it might last.
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Definitions
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- Current age
- Your current age.
- Starting balance
- Total amount that you currently have invested. Include
any sources of investment savings such as 401(k)s, IRAs and Annuities that you wish
to include in this analysis.
- Amount to contribute
-
This is the amount that you will add to your investment savings. You can add additional
amounts weekly, monthly, quarterly or annually. All contributions are assumed to
be made at the beginning of each period.
- Annual return
- This is the annual rate of return you expect from your investments
after taxes. When withdrawing, the return earned is often assumed to be lower due
to more conservative investment choices to help insure a steady flow of income.
The actual rate of return is largely dependent on the type of investments you select.
From January 1970 to December 2008, the average annual compounded rate of return
for the S&P 500, including reinvestment of dividends, was approximately 9.7% (source:
www.standardandpoors.com). During this period, the highest 12-month return was 61%,
from June 1982 through June 1933. The lowest 12-month return was -39%, which happened
twice, once from September 1973 to September 1974 and again from November 2007 to
November 2008. Savings accounts at a bank may pay as little as 1% or less but carry
significantly lower risk of loss of principal balances.
It is important to remember that future rates of return can't be predicted with
certainty and that investments that pay higher rates of return are generally subject
to higher risk and volatility. The actual rate of return on investments can vary
widely over time, especially for long-term investments. This includes the potential
loss of principal on your investment. It is not possible to invest directly in an
index and the compounded rate of return noted above does not reflect sales charges
and other fees that funds and/or investment companies may charge.
- Years to contribute
-
This is the number of years you will be adding new money to your investment savings.
If you wish to start withdrawals immediately, enter 0 for the years to contribute.
- Inflation rate
- What you expect for the average long-term inflation rate.
A common measure of inflation in the U.S. is the Consumer Price Index (CPI), which
has a long-term average of 3.1% annually, from 1925 through 2008. The CPI for 2008
was 4.0%, as reported by the Minneapolis Federal Reserve.
- Inflation adjustments and your contributions
- To keep your periodic contributions
at the same level choose the option "No adjustment for inflation". If you select
"Adjust contributions annually for inflation" we will increase your periodic contribution
at the end of each year by the rate of inflation.
- Amount to withdraw
- This is the amount that you expect to be withdrawing
from your investment savings. You can make withdrawals weekly, monthly, quarterly
or annually. All withdrawals are assumed to be taken at the beginning of each period.
If you choose the option to "Calculate maximum withdrawal" this field will be calculated.
- Withdrawals to last
- This is the number of years that your withdrawals
are to last. If you choose the option to "Calculate time balance will last" this
field will be calculated.
- Inflation adjustments and your withdrawals
- These selections allow you
to adjust your withdrawals for inflation. If you choose "No adjustment for inflation"
your withdrawal will remain at a constant amount for the entire duration of your
withdrawals. "Inflation adjustments begin with withdrawals" will increase your withdrawal
amount at the end of each year by the rate of inflation. This begins at end of the
first year of withdrawals. "Inflation adjustments begin immediately" will increase
the withdrawal amount, that was entered or calculated, by the rate of inflation
beginning immediately. Choosing this option helps illustrate the cost of providing
a current amount of purchasing power throughout your withdrawals.
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Information and interactive calculators are made available
to you as self-help tools for your independent use and are not intended to provide
investment advice. We can not and do not guarantee their applicability or accuracy
in regards to your individual circumstances. All examples are hypothetical and are
for illustrative purposes. We encourage you to seek personalized advice from qualified
professionals regarding all personal finance issues.
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