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An example calculation using sample data
Green text describes the example data.
The example data is for a person who is currently age 45.
a Roth IRA account valued at $25,000,
a Traditional IRA account valued at $150,000, and
a regular (taxable or non-retirement) account valued at $125,000.
The example assumes an annual inflation rate of 3%
and an annual investment rate of return of 7%.
Initial values for the calculation
All values are stated in current dollars,
in order to simplify the usage of the calculator.
For example, you don't have to figure out what your spending
will be in the future as a result of higher prices.
The given inflation rate is used to reduce the investment returns
and to reduce the value of future pensions,
to account for the reduced spending value caused by inflation.
Initially, this person is in Savings mode,
adding $4,000 to the Roth IRA account each year,
and $10,000 to the Traditional IRA account each year.
This will continue for 10 years.
Values for Phase 1 (starting at age 45)
Results for Phase 1The following table shows the results of the
retirement income calculation.
The final column shows the total of taxable items,
which generally include the Roth conversion,
distributions from the Traditional IRA,
and the pension and Social Security income.
Individual circumstances may vary,
and other taxable income is not included here,
such as wages, dividends, interest,
and capital gains that occur in the regular account.
Then, at age 55, this person retires, and enters the Spending phase --
$20,000 from the Roth IRA, and
enough from the regular account to total $40,000.
Also, $25,000 is converted from the Traditional IRA account to the Roth account.
This continues for 10 years.
Values for Phase 2 (starting at age 55)
Results for Phase 2
Finally, at age 65, a pension and Social Security payments begin,
and the spending from the regular and IRA accounts can be reduced.
Note that the purchasing value of the pension has been reduced by inflation,
whereas the Social Security payment always has the same purchasing power
because of cost-of-living adjustments.
The total spending continues at $40,000.
Values for Phase 3 (starting at age 65)
Results for Phase 3
At the end of this example (age 75), the person would have
$37,000 in the regular account,
$131,000 in the Roth IRA account, and
$161,000 in the Traditional IRA account.
Negative values, which are shown in red,
would indicate that an account had run out of money!
To do your own calculation, fill in the boxes in the form,
starting at the top, and click the update button.
The best approach is to calculate one phase at a time;
i.e., fill in the values for the first phase, and click Update.
If you are satisfied with the results for the first phase,
then fill in values for the second phase, and update again.
Repeat until you have calculated as many phases as you need.
Values for Phase 4 (starting at age 75)
Results for Phase 4
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