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Figure Out a Better Tomorrow

Calculator Build a plan to get where you want to go.

A Few Basic Rules

To Get Where You Want to Go

Rule 1: Save! It’s simple. You’ll have more tomorrow if you save more today.

Rule 2: Pay Off High-Interest Debt. You’ll have LOTS more tomorrow if you do.

Rule 3: Use that 401(k). The best way to save for retirement is in a 401(k).  It’s automatic, saves on taxes, and your employer match is “free money.”

Rule 4: Have a Plan. Know where you want to be in 10 years. Make a plan to get there.

Rule 5: Keep Saving. If you reach a goal or pay off a debt, use the money “freed up” to reach another goal or pay off another debt.

Make a Plan

Please fill all required fields
    header-orange 1. Your Age, Income, & Marital Status    
    header-small (Enter your figures in the white boxes)     
    header-column  Age  Income Married? Spouse's Income
    input results-small 
    gap     
    header-orange 2. Set Your Goals    
    header-small If You're Saving for a House    
    header-column  Your Goal Already saved
    input results-small 
    header-small If You're Saving for College    
    header-column  Goal in 10 years
    input results-small 
    header-small A Reserve      
    text  Experts suggest 2-4 months’ earnings. Two-earner families need less. High earners need more. So do those requiring more time to find a job. 
    header-column 
    input results-small 
    header-small Retirement      
    text Enter how much you've already saved & we'll estimate the % of income you need to save +  how much you'll need in 10 years to be "on-track." 
    text Unless you tell us otherwise, in Advanced below, we assume employers match half of what you contribute up to 6% of earnings. 
    header-column  Your savings Spouse's Savings
    input results-small 
    input results-small About how much you need to save 
    input results-small Savings you'll need in 10 years to be "on track"
    gap     
    header-small Now Enter What You Owe    
    header-column    How Much Interest Rate
    input results-small High Interest (Credit Card) Debt 
    input results-small Moderate Interest (Student/Car Loan) Debt 
    input results-small Low Interest (Mortgage) Debt 
    gap     
    header-orange 3. Get Where You Want to Be in 10 Years   
    header-small Enter how much you'll save and use to pay down debts.
    text We'll estimate if and when you hit a goal or pay off a debt & how much of the money used for saving and debts will be "freed up" in 10 years. 
    text Unless you tell us otherwise, in Advanced below, we assume employers match half of what you contribute up to 6% of earnings. 
    text For other assumptions and methods, see Explanations, below. 
    text A key assumption is that you "keep saving" – if you reach a goal or pay off a debt you use money "freed up" for another goal or debt – first for a reserve, then high-interest debt, then a house and moderate interest debt; then retirement, college, and low-interest debt. 
    header-column Objective Goal Monthly Saving Savings in 10 years Year hit 
    input results-small Retirement 
    input results-small Reserve
    input results-small House
    input results-small College
    input results-small Risk to Consider:  Market Tanks  
    gap     
    header-column Debts Owed Monthly Payment Owed in 10 years Year paid
    input results-small High-interest
    input results-small Moderate-interest
    input results-small Low-interest
    gap     
    header-column Total  Dollars % of income
    input results-small Before tax 
    input results-small After tax deductions
    input results-small Income "freed up" in 10 years
    gap     
    header-marker Advanced    
    header-orange Employer Retirement Contributions    
    text We assume you save for retirement with tax-deductible contributions to a 401(k) and get a 50%  employer match (50 cents for every dollar you contribute) up to 6% of earnings.  
    text Correct if this is not the case:    
    header-column Employer match is
    up to
    of earnings
    input results-small As you save    of earnings
    input results-small Total Retirement Saving is of earnings
    gap     
    header-orange Tax Benefits    
    text We assume 1) Retirement Saving is tax-deductible contributions to a traditional 401(k) or IRA and 2) "Low-Interest Debt" is mortgage debt, with tax-deductible interest making up half the payment.
    text The value of the tax deduction is based on your tax bracket, the tax you pay on an additional dollar of income. 
    input results-small Your tax bracket = 
     
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    Tools You Could Use

    To Refine Your Plan & Get It Done

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    Under the Covers

    How We Make Projections & Our Disclaimer

    All amounts are in today’s dollars.

    Rates of Return & Interest Rates

    • Reserves and savings for a down payment are held in bank savings accounts with interest equal to the rate of inflation.
    • Educational savings are in a 529 Plan, where investment earnings are not taxed, and are invested in half in stock and half in bond mutual funds.
    • Retirement savings are held in a tax-advantaged 401(k), where contributions are deductible and the investment earnings are not taxed, and are invested in a Target Date Fund suited to your age.  (For workers under 50, that means a large share is invested in stocks).
    • Stock funds assumed to earn 6.3% and bond funds 2.2% above inflation and fees, their long-term historical average.
      • We use 2000-2009 returns as the “market tanks” returns, with stock funds losing 3.7% and bond funds earning 4.3% above inflation and fees.
    • The interest rates, unless changed in Advance, are:
      • 12% on high-interest rate debt, such as standard credit card debt.
      • 7% on moderate interest-rate debt, such as student loans.
      • 4% on low-interest rate debt, assumed to be mortgage debt, where the interest is tax deductible.

    Retirement Savings Needed in 10 Years to be “On-Track”

    • We first estimate the income you’ll need to maintain your standard of living in retirement, assumed to be 75% of pre-retirement income, or the income you’ll have in your 50s.
      • We assume your income rises relative to national average wages in line with the “wage scale” developed by the Social Security Administration and that national average wages rise 0.5% a year.
    • We estimate your Social Security benefit for retirement when the primary earner is age 65, and assume a 10% cut in benefits to help close the program’s long-term financing shortfall.
    • We assume you draw the rest of your retirement income from savings, and draw out 4% of your savings as income.  So if you need 30% of pre-retirement income from savings, you’ll need 7½ times that income in savings when you retire.
    • We then the estimate the savings you’ll have at retirement from what you’ve already saved.  The rest must be provided by what you’ll save going forward.
    • We then estimate the % of income you must save to hit that target.
    • You’ll need to save less than indicated if you get a more generous employer match or if you’ll get a pension, retire later than 65, or downsize when you do.
    • You’ll also need to save less than indicated if you’ll “save more tomorrow” – say by using money freed up by paying of debts or meeting other saving objectives.

    When You Hit a Savings Goal or Pay-off a Debt

    • Money “freed up” shifts to other objectives and debts in the following order,
      • First to near-term priorities: 1) Reserve.  2) High-Interest Debt.  3) Down Payment.  4) Moderate-Interest Debt.
      • Then to long-term goals: 5) Retirement.  6) Kid’s Education.  7) Low-Interest Debt.
    • Inflation assumed to be 3% a year.  As debt and debt payments don’t rise in dollar terms, they take less of your earnings over time.  The money “freed up” is used for other objectives and debts according to the priorities listed above.
    • Saving for Retirement and for your Kid’s Education stops when your savings, earning the assumed rates of return, are sufficient to hit your 10-year target.

    Totals 

    • “Total Saving and Debt Payments” is after-tax, with
      • Retirement saving assumed to be tax-deductible contributions to a traditional 401(k) or IRA.
      • “Low-interest debt” assumed to be mortgage debt, with tax-deductible interest making up half the payment.
      • Your marginal tax rate – the tax you pay on an additional dollar of income – assumed to be 15%, unless you indicate otherwise in Advanced.
    • “Total Savings” ignores the fact that retirement savings and educational savings are not exactly comparable to other savings, as investment earnings are not taxed but withdrawals are.

    DISCLAIMER: The information provided on the SquaredAway website is for educational purposes only.  It is not intended to provide personal financial advice.

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