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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.

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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