Understanding how long your savings will last is crucial for effective financial planning, especially when considering retirement. Our “How Long Will My Money Last Calculator” is a straightforward tool designed to help you estimate this. While some inputs are readily available, others require careful assumptions about your financial future and investment growth.
Key Inputs for Your Financial Longevity Calculation
To effectively use the “how long will my money last calculator,” you’ll need to consider these key inputs:
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Current Savings Balance: This is the easiest to determine – simply the total amount you currently have saved in your retirement accounts and other accessible savings.
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Anticipated Monthly Withdrawal Amount: This is the amount you plan to withdraw from your savings each month to cover your living expenses. Consider your current budget as a starting point. A common approach is the 4% rule, which suggests withdrawing 4% of your initial retirement savings each year.
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Annual Withdrawal Increases: To maintain your purchasing power, it’s important to account for inflation. Historically, the average annual inflation rate has been around 3%. Increasing your withdrawals annually by 3% to 5% can help you keep pace with rising living costs.
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Annual Return on Savings (Pre-Tax): This is the estimated return on your investments. It depends on your investment strategy. Aggressive portfolios may aim for higher returns but carry more risk. Conservative portfolios, common for retirees, are less risky but may yield lower returns. A historical average return for broad market indexes is often in the 5% to 8% range.
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Federal Marginal Tax Bracket: Your tax bracket in retirement will affect how much of your withdrawals you actually get to spend. Treat withdrawals from tax-deferred accounts and other income sources like Social Security as taxable income to estimate your marginal tax rate.
Planning for Financial Security
By using a “how long will my money last calculator” and carefully considering these inputs, you can gain valuable insights into the longevity of your savings and make informed decisions for a secure financial future. Remember to regularly review and adjust your plan as your circumstances and financial markets change.
