Calculators

Retirement Income Calculator Glossary of Terms

Definitions

Starting balance

Initial balance that you have in your retirement accounts.

Annual contributions

The amount you will contribute to your retirement savings each year. This calculator assumes that you make your contribution at the beginning of each year. 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 contribution at the start of each year, and any withdrawals happen once per month at the beginning of each month.

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.

Rate of return before retirement

This is the annual 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. 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. 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.

Current tax rate

Your current marginal tax rate you expect to pay on your taxable investments.

Retirement tax rate

The marginal tax rate you expect to pay on your investments at retirement.

To increase deposits with inflation checkbox

Check this box if wish to have your annual contribution increased each year to keep up with inflation.

Is savings is tax deferred checkbox

Check this box if your retirement savings is being deposited into a tax deferred account. This includes an IRA, 401(k), 403(b), governmental 457(b), variable annuity or other tax deferred investment.