- Annual rate of return
- This is the annual rate of return you expect from your
investments after taxes. The actual rate of return is largely
dependent 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 may 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.
- Existing balance
- Any existing balance for the accounts.
- Compensate for tax-deduction
- If you check this box the calculator will assume contributions
to the tax-deferred investment are tax-deductible when they are
made. The calculator will then increase the contribution amount for
the tax-deferred investment by the amount required to make the net
contribution equal to the investments that have contributions made
on an after tax basis.
- Years to contribute
- Number of years you plan on making contributions.
- New contributions
- Your periodic contribution. All contributions are assumed to
happen at the beginning of the period.
- Contribution frequency
- The frequency of your contributions. The options are Monthly,
Quarterly, or Annually. All contributions are assumed to be made at
the beginning of the period.
- Years of withdraws
- Number of years you plan on taking distributions. Enter "1" for
a lump sum distribution. All distributions are assumed to happen at
the beginning of the period.
- Withdrawal frequency
- The frequency of your distributions. The options are Monthly,
Quarterly or Annually. All distributions are assumed to be taken at
the beginning of the period.
- Tax during contributions / withdrawals*
- Your estimated marginal tax rate. You can use the table below
to assist you in determining your current tax rate.
| 10% |
$0 - 16,050 |
$0 - 8,025 |
$0 - $11,450 |
$0 - 8,025 |
| 15% |
$16,051- 65,100 |
$8,026- 32,550 |
$11,451- 43,650 |
$8,026- 32,550 |
| 25% |
$65,101- 131,450 |
$32,551- 78,850 |
$43,651- 112,650 |
$32,551- 65,725 |
| 28% |
$131,451- 200,300 |
$78,851- 164,550 |
$112,651- 182,400 |
$65,726- 100,150 |
| 33% |
$200,301- 357,700 |
$164,551- 357,700 |
$182,401- 357,700 |
$100,151- 178,850 |
| 35% |
over $357,700 |
over $357,700 |
over $357,700 |
over $178,850 |
Source:
http://www.irs.gov/pub/irs-drop/rp-07-66.pdf
*Lower maximum tax rates on capital gains and dividends would
make the investment return for the taxable investment more
favorable, thereby reducing the difference in performance between
the hypothetical investments shown. Investors should consider their
personal investment horizon and income tax bracket, both current
and anticipated, when making an investment decision, as these may
further impact the comparison.
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