Definitions
Amount Currently
Invested
Total value of all of your
current investments. Although you could include your home and personal property
in this amount - it is a bit more accurate to include only your savings, retirement
accounts and investments.
Expected Inflation
Rate
What you expect for the average long-term inflation rate. A common measure
of inflation in the U.S. is the Consumer Price Index (CPI). The CPI for 2010
was 2.4%, as reported by the Minneapolis Federal Reserve. From 1925 through
2010 the CPI has long-term average of 3.1% annually. Over the last 30 years
highest CPI recorded was 13.5% in 1980.
Expected Rate of Return
This is the annually compounded rate of return you expect from your investments.
For the purposes of this calculator, taxation is not factored into the results.
If you pay taxes on the interest, dividends or capital gains from these investments,
you may wish to enter your after tax rate of return.
The actual rate of return is largely dependent on the type of investments
you select. For example, from December 2000 to December 2010, the annual
compounded rate of return for the S&P 500 was 0.899%, including reinvestment
of dividends. From January 1970 to December 2010, the average annual compounded
rate of return for the S&P 500, including reinvestment of dividends,
was approximately 10.05% (source: www.standardandpoors.com). Since 1970,
the highest 12-month return was 61% (June 1982 through June 1983). The
lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts
at a bank may pay as little as 1% or less but carry significantly lower
risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and
that future rates of return can't be predicted with certainty and that
investments that pay higher rates of return are generally subject to higher
risk and volatility. The actual rate of return on investments can vary
widely over time, especially for long-term investments. This includes the
potential loss of principal on your investment. It is not possible to invest
directly in an index and the compounded rate of return noted above does
not reflect sales charges and other fees that funds and/or investment companies
may charge.
Millionaire
Target Age
The
age you want to become a millionaire. For example, to find out what it
could take to be a millionaire by age 40, enter 40 here.
Savings Per Month
The amount you will contribute each month to your investments. This calculator
assumes that all savings are added to your account at the beginning of the month.
Your Age
Your current age in years.
Information
and interactive calculators are made available to you as self-help tools
for your independent use and are not intended to provide investment advice.
We can not and do not guarantee their applicability or accuracy regarding
your individual circumstances. All examples are hypothetical and are for
illustrative purposes. We encourage you to seek personalized advice from
qualified professionals, at the credit union or elsewhere, regarding all
personal finance issues.
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