January 21, 2019 at 11:00 am #3598
You have found the Charting Your Retirement website and you are finally ready to enter data into the retirement calculator and find out where you stand. Can you make your target retirement date? Will you outlive your money? What degree of confidence can you find given your present position in life, and if you are not on track what can you do about it? This guide will help you fill out the retirement calculator form step by step. In most cases, the fields are obvious, and there is “bubble help” that appears when you highlight each field or highlight “?” in a page section.
If you click on the Retirement Calculator link, you will find several pages of forms that you are asked to fill out. Some people may breeze through it, while others may find it a bit daunting. If you are in the latter camp, don’t despair. With a little focus, patience, and some information gathering you will quickly get through it. There is nothing overly complicated on any form. In all cases, it’s a matter of looking up information you already have, perhaps making a few simple assumptions here and there. Don’t trust retirement calculators that only have a few fields or ask a few questions. You have worked hard all your life and you don’t want to shortchange the retirement planning process now. It will take a little effort, but the potential rewards can be tremendous.
We recommend you read the Retirement Calculator introduction to understand the output you will get once you are finished with the forms. You might want to peruse Sample Charts and Reports too. We have a “Resources” section on the site to help with various aspects of meeting your retirement goals: health insurance, college expenses, nursing home and living expenses, social security, and taxes.
Next, it’s time to open the Retirement Calculator itself (you must register on the site to use the calculator. The only reason we ask that you do that is so that we can store your information and tie it to you when you come back to the site later). You can open the calculator input form from the Retirement Calculator menu. There is also a link in the top right-hand corner of the site.
Overall Structure For The Retirement Calculator Input Form
The Retirement Calculator contains one form with 7 sub-pages. You navigate from one page to the other via the “Next” and “Previous” buttons at the bottom of a page.
retirement calculator navigation
You can also simply pick the page by clicking the page from the top navigation bar.
retirement calculator steps
This allows you to skip around. Initially, we recommend progressing linearly through the retirement calculator form using “Next”. To fine tune or change any information, you can use the information bar to get around more quickly. The calculator requires a minimum amount of information to give you results. Don’t worry about that; just enter as much as you can. You will be given feedback if information is missing when you try to run your reports. The retirement calculator ensures your data is saved as you move from page to page. If you are working on a page and simply close your browser without saving, that data will be lost.
The household page is where you will enter tax, growth and inflation rates, living expenses, house value and your expected stock/bond ratio. As the name implies, “Household” applies to your whole house, not any single individual, unless of course you are the only member of your household.
Tax Rates and Early Withdrawl
Consult your tax forms for state and local income tax rates. To determine your rate, divide your “Total Tax” by “Adjusted Gross Income”. If you are married, filing separately, combine the data from both tax returns. Most people should leave “Enforce Early Withdrawal Penalties” checked, but you can uncheck it if you meet one of the exceptions for early withdrawals. Refer to IRS topic for exception criteria Exceptions to Tax on Early Distributions.
Enter both taxable and tax free/deferred growth rates. You can estimate these values unless you are well-tuned to your investment track record, the types of investments in your portfolio and the types of returns you can expect from these investments. Be realistic and think about what you can expect to achieve in the long term.
The calculator defaults to an inflation rate of 2.5%. You have the option to change this, or alternatively, you can check “Use historical 5 year inflation rate of …” if you prefer. Keep in mind that inflation has been historically low in the last 5 years (at the time of this writing) and may not be indicative of what we will see in the longer term.
Enter your yearly living expenses. For some people, this is the hardest part of the whole calculator (it is for me!). Use budgeting tools that are available. Ultimately, this boils down to looking at your historical records for what things cost. Consult bank and credit card statements or look at your bills. Be as accurate as you can as guesses can be wildly inaccurate. Don’t include mortgage payments here; the form will ask for these later. Also, don’t add any one-time or non-recurring payments. The calculator has a separate page for these types of expenses. Your living expenses may go up or down in retirement. If you think you will lead a more frugal lifestyle, lower the “Living Expense Factor” below one. If you think your expenses will be higher (perhaps you want to travel the world or live in a resort community), increase the “Living Expense Factor” above one.
Enter your home value. For a good estimate, consult Zillow. If you think you are going to sell your home in the future, select “Downsize/Upsize in Future?” and then enter and estimate of that house’s value in today’s dollars. You can downsize or upsize depending on your goals (the smaller, more practical house, or the roomy house on the lake). If you don’t currently own a house but expect to in the future, you would also enter the value here. Enter the date at which you expect to buy this house. If you expect to finance your house, be sure to enter a mortgage on the ‘Mortgage’ page and enter any down payment and closing expenses on the ‘Special Situations’ page as a ‘Special Expense’.
Stock/Bond Ratio (Valid only for Monte Carlo Charts)
Enter the percent of your portfolio that are invested in equities (stocks). The retirement calculator uses this value to randomize stock and bond returns for the past 60+ years to provide a confidence level for your desired retirement age. It also uses the value to optimize your retirement age by finding the earliest year you can retire. The field is valid only for Monte Carlo Charts. The report assumes that bonds comprise the remaining percentage of your portfolios. This number can and probably should change over time. Conventional wisdom indicates that you should progress into more stable (fixed-income) investments as you get closer to retirement, although not everyone will follow this course. For now, pick a ratio that is reflective of your portfolio mix, consistent with your investment philosophies and your willingness to take on risk.
This page allows you to add a separate record for each retiree. Use the “Add Retiree” button to add each retiree. Once a retiree has been added you may “Edit” or “Delete” that record. Bear in mind that on the “Assets” page you will associate each retiree you enter here with an asset. If you delete a retiree that has an asset, the asset will be left with no associated retiree. Simply go into the Asset page to add the appropriate retiree or delete the asset.
Select “Add Retiree” to enter the “Add Retiree” form. Enter identifying information about the retiree, name, gender, year born. The calculator calculates mortality age. However, you can override this age by entering a value in the “Mortality Override” field. Enter the age you are targeting for retirement.
Enter your current gross salary including any bonuses you receive. The calculator will automatically increase your salary based on the inflation rate entered on the Household page. If you pay income taxes in another state, enter that state’s tax rate.
Yearly Non-Taxable Contribution (401K, 403b, etc.)
In this section, enter the percentage of your salary that you set aside for your non-taxable portfolio (e.g., 401K or the like). Enter any extra amount you contribute to a non-taxable account such as an IRA. Enter your yearly contribution up to the fully deductible amount that you are eligible for.
Yearly Social Security and Disability
The section is where you will enter your yearly social security benefit and start year. The calculator estimates this benefit for you with the assumption that you will retire at 67, but this is a very crude estimate. It is HIGHLY SUGGESTED that you log into the Social Security Administration website to get a more accurate benefit amount. Enter your yearly full benefit amount (i.e., the yearly amount you will receive at 67 years old). The calculator will adjust up/down based on the ‘SS Start Age’. If you are disabled, enter your yearly gross disability amount and select the year the disability will end. If the disability lasts throughout your life, select “Continuous” from the drop down.
Yearly Pension and Recurring Income
Although pensions are getting more and more rare, you can enter any pension information in this section. Enter your yearly pension start amount and age. If you have recurring income separate from wages (e.g., alimony, spousal support, an annuity, royalties etc.), enter that yearly amount and select an ending year. If the recurring income lasts “forever”, enter “Continuous” from the drop down.
When you are done with the form, press “Submit” to return to the “Retirees” page. At this point you can add another retiree, edit a retiree or delete a retiree.
The assets page allows you to enter information about all your assets in your taxable, tax free and tax deferred portfolios. Like “Retirees”, you can enter multiple records and have the option of editing, deleting or adding records to the system. Use the “Add Assets” button to enter an asset.
You must first select the retiree for this asset from the dropdown. You can’t fill out this form until you have completed entering retirees on the previous page. Next you will fill in amounts for each asset category.
For taxable assets you must also enter “Taxable Portfolio Cost Percentage (%)”. This is the cost of your “Taxable Portfolio” as a percentage. Take the total cost (or basis) and divide by “Taxable Portfolio” to determine the percentage. For example, if the value of your “Taxable Portfolio” is $100,000 and your cost is $75,000 (profit of $25,000), you calculate the “Taxable Portfolio Cost Percentage” at 75%. This value is necessary to determine taxes as you sell portions of your portfolio. Most brokerage and mutual fund companies keep track of your basis, so this can be calculated. If you do not know your basis, you can estimate it, but the more accurate, the better.
Tax Free and Tax Deferred Assets
Fill in tax free and tax deferred assets. Look at the FAQ page for information on the differences between these types of portfolios.
When you are done with the form, press “Submit” to return to the “Assets” page. At this point you can add another asset, edit an asset or delete an asset.
If you have children that are living with you and you expect them to go to college, this page allows you to enter expected college expenses. Select “Add Child” to enter a form; enter the child’s name, birth year and expected yearly college cost (tuition, room and board, books, etc.) in today’s dollars. The Retirement Calculator will forward cost this value for 4 years of college starting at the age of 18.
Press “Submit” when you are finished adding information for a child to return to the “Children” page. At this point you can add information for another child, edit a child’s record or delete the record.
The Special Situation page allows you to add “special income” or “special expenses” that you expect to occur at some point in your life (i.e., a one-time occurrence). For example, if you are expecting an inheritance, you would enter that as “special income”. If you think a nursing home might be in your future, you would enter that as a “special expense”. Enter Special situations by year and in future dollars. In the case of nursing home costs, if multiple years are involved, you would enter a separate record for each year. In that way, this form can help with what-if analyses (e.g., what would happen if a spouse were to enter the nursing home for 3 years?). Other examples of special situations are private schools or a future down-payment on a house.
Select “Add Special Situation” to add a special situation record. Enter a description, the year the event will occur and an amount. Then enter if the special situation is “Special Income” or “Special Expense” from the “Type” dropdown. Note that if you are entering income, enter the future value of the income after taxes. Some income might be tax- free.
Press “Submit” when you are finished adding a special situation and return to the “Special Situations” page. At this point you can add information for another special situation, edit a special situation or delete a special situation.
If you own one or more mortgages either now or in the future, enter that information on this page. Select “Add Mortgage” to invoke the “Add Mortgage” form. Enter a description, the term in years and the start year. Remember that the start year can be past, present or future. Enter the annualized interest rate as a percentage. Enter the principal, which is the amount financed or the balance of the debt.
Press “Submit” when you are finished adding a mortgage and return to the “Mortgage” page. At this point you can add information for another mortgage, edit a mortgage or delete a mortgage.
This page allows you to enter installment debts such as credit card debts. Select “Add Installment Debt” to enter the form. Enter a description, the number of years you wish to pay off this debt, the balance of the debt and the annualized interest rate the debt incurs.
Press “Submit” when you are finished adding an installment debt and return to the “Installment Debt” page. At this point you can add information for another installment debt, edit an installment debt or delete an installment debt.
We recommend that you navigate back through the forms and check your entries. Click “Save/Run” from any page. Now you can look at the results from the retirement calculator, and look through all of the generated reports. The retirement calculator makes it easy to run “what if” analyses. Simply go back into the calculator and change the applicable data. For example, if you what to know what effect increasing your 401K contribution, simply change that information on the “Retirees” page and re-run the retirement calculator. Good luck and let us know how it goes!
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