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Do you know what it takes to work towards a secure retirement? Use this calculator
to help you create your retirement plan. View your retirement savings balance and
your withdrawals for each year until the end of your retirement. Social security
is calculated on a sliding scale based on your income. Including a non-working spouse
in your plan increases your social security benefits up to, but not over, the maximum.
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Definitions
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- Current age
- Your current age.
- Age of retirement
- Age you wish to retire. This calculator assumes that
the year you retire, you do not make any contributions to your retirement savings.
So if you retire at age 65, your last contribution happened when you were actually
age 64. This calculator also assumes that you make your entire contribution at the
end of each year.
- Household income
- Your total household income. If you are married, this
should include your spouse's income.
- Current retirement savings
- Total amount that you currently have saved
toward your retirement. Include all sources of retirement savings such as 401(k)s,
IRAs and Annuities.
- Rate of return before retirement
- This is the annual rate of return you
expect from your investments after taxes. 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.
- Rate of return during retirement
- This is the annual rate of return you
expect from your investments during retirement, after taxes. It is often lower than
the return earned before retirement 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.
- Percent of income to contribute
- The percentage of your annual income you
will save for your retirement goals. This should reflect the total you save toward
your retirement. This should include any 403(b), 401(k), or 457(b) plans and your
employer contributions to these plans. It should also include any other retirement
accounts such as an IRA or a Roth IRA and any retirement savings in non-retirement
accounts. This calculator assumes that you make one annual contributions at the end
of each year, and any withdrawals happen once per year at the end of the year.
- Expected salary increase
- Annual percent increase you expect in your household
income.
- Years of retirement income
- Total number of years you expect to use your
retirement income.
- Percent of income at retirement
- The percent of your working year's household
income you think you will need to have in retirement. This amount is based on your
income earned during the last year you will work. You can change this amount to
be as low as 50% and as high as 150%.
- Expected rate of inflation
- 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.
- If you are married checkbox
- Check this box if you are married. Married
couples have a higher maximum social security benefit than single wage earners.
- To include Social Security checkbox
- Check this box if you wish to include
social security benefits in your retirement planning. Social Security is based on
a sliding scale depending on your income, how long you work and at what age you
retire. Social Security benefits automatically increases each year based on increases
in the Consumer Price Index. Including a spouse increases your Social Security benefits
by 1.5 times your individual estimated benefit. Please note that this calculator
assumes that you have only one working spouse. Benefits could be different if your
spouse worked and earned a benefit higher than one half of your benefit. If you
are a married couple, and both spouses work, you may need to run the calculation
twice - once for each spouse and their respective income. This calculator provides
only an estimate of your benefits.
The calculations use the 2009 FICA income limit of $106,800 with an annual maximum
Social Security benefit of $27,876 per year for a single person and 1.5 times this
amount for a married couple. To receive the maximum benefit would require earning
the maximum FICA salary for nearly your entire career. You would also need to begin
receiving benefits at your full retirement age of 66 or 67 (depending on your birthdate).
Your actual benefit may be lower or higher depending on your work history and the
complete compensation rules used by Social Security.
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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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