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Retirement Shortfall Calculator
One of the biggest risks to a comfortable retirement is running out of money too soon. This calculator helps you determine your projected shortfall or surplus at retirement. You can also see just how long your current retirement savings will last. If your results project a shortfall, you might need to save more, earn a better rate of return, or possibly delay your retirement.
Definitions
- Current retirement savings
- This is your current retirement savings. You should include any savings or investments that are specifically for your retirement. Be careful not to include amounts ear marked for other purposes, such as your children's education.
- Monthly contributions
- The amount you will contribute each month to your retirement savings. This calculator assumes that you make your contribution at the beginning of each month. We also assume that this amount remains constant until you retire.
- Years before you retire
- The number of years you have to save before your retirement. If you are planning on retiring immediately, you should enter a zero.
- Number of years in retirement
- The number of years you expect to spend in retirement. If this retirement savings plan is intended to support you and your spouse, make sure this is long enough years to account for your spouses potentially longer lifespan.
- Annual retirement expenses
- Your after tax retirement expenses. Since this calculator assumes that you will be paying income taxes on interest as it is earned, your expenses should be entered on an after tax basis. Your retirement expenses are increased each year by your expected inflation rate if the "Increase expenses with inflation" box is checked.
- Expected inflation rate
- What you expect for the average long-term inflation rate.
- Rate of return before retirement
- This is the annually compounded rate of return you expect from your investments before taxes. The actual rate of return is largely dependant on the type of investments you select. For example, for the last thirty years the average annual rate of return for domestic equity stocks has been about 10%. Savings accounts at a bank pay as little as 2%. For the purposes of this calculator taxation is not factored into the results.
- Rate of return during retirement
- This is the rate of return expected during retirement. It is often lower than the return earned before retirement due to more conservative investment choices to help insure a steady flow of income. For example, a balanced portfolio of stocks and bonds may earn two to three percent less each year, but would be less susceptible to dramatic stock market fluctuations.
- Federal tax rate
- Your marginal federal tax rate.
- State tax rate
- Your marginal state tax rate.
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