Disclaimers
The calculations used within this tool are based solely on
information provided by the user. All examples, if any, are
hypothetical and for illustrative purposes only and do not
represent current or future performance of any specific
investment. No representations, warranties or guarantees are
made as to the accuracy of any estimates or calculations.
Personal Capital is not liable for any damages or costs of any
type arising out of or in any way connected with your use of
this calculator. The information provided in this tool does not
serve, either directly or indirectly, as legal, financial or tax
advice and you should always consult a qualified professional
legal, financial and/or tax advisor when making decisions
related to your individual tax situation. Past performance is
not a guarantee of future return, nor is it necessarily
indicative of future performance. Keep in mind investing
involves risk.
Calculation Assumptions
This tool is intended to provide a basic sense of how your
portfolio may grow and support your stated spending goals. It
also gives you an easy way to see how adjustments to the most
important variables (savings rate, spending rate and retirement
age) can impact you. All results are presented in today’s
dollars, inflation adjusted at 3.5%. Projections utilize a Monte
Carlo simulation, with the median scenario highlighted. The
median scenario (or 50th percentile) shows the level where 50%
of the scenarios had a more favorable outcome. We ran 5,000
simulations based on the expected cash flows, annual return and
standard deviation assumptions based on risk tolerance selected
as listed below. The return and risk assumptions are based on
the historical performance of the high level asset allocation of
the risk model selected. The portfolio survival percentage
represents the percent of the simulations which ended age 92
with a balance above $0. Growth and volatility assumptions are
based on historical asset class returns and correlations using
well diversified portfolios. They do not account for fees or
trading costs.
Highest Growth is 9.3% historical median return, 15.6%
historical risk
Aggressive is 8.8% historical median return, 13.6% historical
risk
Moderate is 8.2% historical median return, 11.5% historical
risk
Conservative is 7.2% historical median return, 7.5% historical
risk
Highest Safety is 6.0% historical median return, 4.8%
historical risk
We chose an inflation number higher than current levels to help
account for low current interest rates which may lead to lower
future investment returns. In the accumulation stage we assume
no taxes on portfolio growth, but tax all portfolio withdrawals
(spending above income) at 20%. In the distribution phase, we
assume a single tax filing status, annual income of $65,000, and
no state tax; taxable withdrawals are taxed at long-term capital
gains rates with an assumed basis of 50% of the taxable
portfolio at retirement; each year, 2% of the taxable portfolio
balance is paid out in dividends, taxed as qualified dividends;
tax-deferred withdrawals taxed at ordinary income rates.
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