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The following factors play an important role in your understanding this process:
| Years till Retirement | |
This factor determines the duration of time available for your money to grow tax-deferred. This factor is significant in determining how large your nest egg will become before you start withdrawing from it.
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| Annual Investment Amount | |
The amount you can contribute annually towards your retirement. Starting early and contributing the maximum amount possible will ensure that you will be able to afford to withdraw the most during your retirement.
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| Annual Withdrawal | |
The amount you can withdraw annually during your retirement. It is assumed that you will be withdrawing both interest and principal to meet your retirement needs. The more you withdraw, the fewer years your nest egg will last.
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| Annual Return | |
The annual return on your investments. Obviously, the more your investments yield before your retirement the bigger your nest egg will be at retirement. This translates to a larger amount available during retirement or more assurance that your money will be available for a longer retirement should you need it.
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By playing with these variables, you will be able to answer the following questions and more:
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'How long will my money last if I withdraw $25,000?',
'If I contribute $1,000 more every year, how long will it last?',
'If I contribute $1,000 more every year, how much more can I withdraw every year?',
'How much effect does the yield have? If I average 1% more every year, what does that translate to in retirement duration? What does it translate to in increased retirement income?',
'If I withdraw $5,000 more every year, how soon will I run out of money?',
'If I postpone my retirement 5 years, how long will my money last? How much more can I withdraw? How much less can I contribute?',
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By clicking the diamond shaped slider along the lines of each of the factors, you will be able to quickly input values specific to your situation. Alternatively, you may click the edit fields to the right of the sliders to input more precise values. Whatever the method you use, by playing with this calculator, you will be able to get more out of it than just the numerical result. |
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Assumptions:
It was assumed that the annual contributions would be made at the end of each year.
It was also assumed that the annual withdrawals would be made at the beginning of each year.
You may have to pay taxes on the amount you withdraw every year.
It was assumed that your contributions would earn tax-deferred for the entire duration (even during retirement).
It was assumed that your contributions would not have a limit before losing tax-deferred status.
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