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Use this calculator to help determine which type of retirement account may be the best option for your retirement.
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Definitions
- Current age
- Your current age.
- Elective deferral contribution
- The amount you will contribute to a your plan's account each year. This calculator assumes that you make 12 equal contributions throughout the year at the beginning of each month. The annual maximum elective deferral contribution for 2009 is $16,500. If you are age 50 or older, a "catch-up" provision allows you to contribute even more. In 2009, employees age 50 or older can deposit an additional $5,500 into their account. It is also important to note that employer contributions do not affect an employee's maximum elective deferral contribution limit.
It is important to note that some employees are subject to additional contribution limits.
- Expected rate of return
- The annual rate of return for your account. This calculator assumes that your return is compounded annually and your deposits are made monthly. 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 1983. 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 these scenarios are hypothetical and 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.
- Age of retirement
- Age you wish to retire. This calculator assumes that the year you retire, you do not make any contributions to your account. So if you retire at age 65, your last contribution happened when you were actually 64.
- Current tax rate
- The current marginal income tax rate you expect to pay on your taxable investments. Use the table below to assist you in determining your current tax rate.
| 10% |
$0 - 16,700 |
$0 - 8,350 |
$0 - $11,950 |
$0 - 8,350 |
| 15% |
$16,701- 67,900 |
$8,351- 33,950 |
$11,951- 45,500 |
$8,351- 33,950 |
| 25% |
$67,901- 137,050 |
$33,951- 82,250 |
$45,501- 117,450 |
$33,951- 68,525 |
| 28% |
$137,051- 208,850 |
$82,251- 171,550 |
$117,451- 190,200 |
$68,526- 104,425 |
| 33% |
$208,851- 372,950 |
$171,551- 372,950 |
$190,200- 372,950 |
$104,425- 186,475 |
| 35% |
over $372,950 |
over $372,950 |
over $372,950 |
over $186,475 |
Source: http://www.irs.gov/pub/irs-drop/rp-08-66.pdf
- Retirement tax rate
- The marginal tax rate you expect to pay on your investments at retirement.
- After tax total at retirement
- For Roth account, this is the total value of the account. For the pre-tax account, this would be variable based on the checkbox for the reinvestment of any potential tax savings. It would include 1) The value of the account after you pay income taxes on all earnings and tax-deductible contributions and 2) what you would have earned if you had invested (in an ordinary taxable account) any income tax savings, if you choose to invest any of the tax savings.
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