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Retirement Shortfall

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.

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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 earmarked 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. Your contributions should be the total you save toward your retirement each month. 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.

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 enough years to account for your spouse's 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. 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 2009. The CPI for 2009 was -1.0%, as reported by the Minneapolis Federal Reserve.

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 dependent on the type of investments you select. For example, from December 1999 to December 2009, the average annual compounded rate of return for the S&P 500 was -0.6%, including reinvestment of dividends. From January 1970 to December 2009, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.1% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). 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.

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 dependent on the type of investments you select. For example, from December 1999 to December 2009, the average annual compounded rate of return for the S&P 500 was -0.6%, including reinvestment of dividends. From January 1970 to December 2009, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.1% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). 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.

Federal tax rate
Your marginal federal tax rate.

State tax rate
Your marginal state tax rate.

Information and interactive calculators are made available to you as self-help tools for your personal independent use and are not intended to provide investment advice. We can not and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.