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
dependant on the type of investments you select. From January
1970 to December 2007, the average compounded rate of return
for the S&P 500, including reinvestment of dividends, was
approximately 11.4% per year (source: www.standardandpoors.com).
During this period, the highest 12-month return was 61%,
and the lowest was -39%. Savings accounts at a bank can
pay as little as 1% or less.
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 dependant
on the type of investments you select. From January 1970
to December 2007, the average compounded rate of return
for the S&P 500, including reinvestment of dividends, was
approximately 11.4% per year (source: www.standardandpoors.com).
During this period, the highest 12-month return was 61%,
and the lowest was -39%. Savings accounts at a bank can
pay as little as 1% or less.
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 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 80% and
as high as 120%.
Expected salary increase
Annual percent increase you expect in your household income.
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 2007. The CPI for 2007 was 2.4%,
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 2008 FICA income limit of $102,000
with an annual maximum Social Security benefit of $26,220
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.
