What do Aggressive and Conservative mean?

The Investment Calculator uses two investment strategies that typically produce two different retirement scenarios. Aggressive investing indicates a higher financial risk with a higher potential reward, while conservative investing offers a lower financial risk with a more moderate potential reward.

Aggressive investing typically means that you will invest in more stocks than in bonds. This type of investment strategy is smart when you have a longer amount of time before your retirement. A longer amount of time can also, in theory, withstand all the volatility of the stock market. The other good news is that more time passing will compound your interest, resulting in significantly larger retirement savings.

Conservative investing is a more balanced strategy in which you invest in stocks as well as bonds. The return, or the amount that your money grows, is not as large as it can be when aggressively investing but the risk is lower. Conservative investing is best when your retirement date is nearby. Vanguard published a great article about these types of scenarios, showing the historic risks and rewards in quantitative form. These table graphs will show the different strategies in terms of being “growth” or “balanced” oriented and displays the assumptions behind each retirement strategy.

How is Monthly Income Calculated?

The retirement calculator takes the Total retirement savings and calculates how much monthly income a 4% annuity would generate without drawing from the principal. This indicates the type of lifestyle you can expect without running out of money.

What is my retirements purchasing power today?

Inflation is inevitable. If that word is new to you, it simply determines how much purchasing power of your dollar. Historically, inflation has always increased with time. The average inflation is currently 3.22%.

Where do the “recommended” values come from?

These recommendations are correlated to a “comfortable” lifestyle. “Comfortable lifestyle” is a subjective term used to describe retirement savings that lets you be mostly free from financial restrictions or fears. A recommendation helps you know what your monthly investment and initial investment should be in order to achieve a “comfortable” retirement lifestyle.

The investment calculator uses three lifestyle terms to depict retirement scenarios: Frugal, Content, and Comfortable. Frugal describes a lifestyle where you will have to carefully monitor your spending to make sure your savings will last. A comfortable lifestyle describes a scenario where you can spend librally and enjoy retirement. Content is somewhere in the middle where you are able to enjoy retirement but still monitor your spending.

Is social security factored into this calculation?

No, Social Security is not included in this retirement calculation. The investment calculator leaves out Social Security because it tends to vary too greatly from person to person. Social Security also varies depending on the age that you decide to collect. If you collect at age 62, you will receive 25% less. If you collect at 70, you can collect a check for 32% larger.

Social Security is important in calculating your retirement savings. It can impact your monthly retirement income greatly. The average monthly retirement benefit was $2,687 in 2017, or $32,000 for the whole year. The goal of this calculator is to help you define helpful strategies but not to give individualized investment advice.

How accurate is the calculator?

Investment Calculator provides a generalized overview of your retirement situation, but it is not intended to replace a financial advisor. Our goal is to help you get a better understanding of your financial outlook and inspire you to save / invest more.