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Retirement Calculators
- How much do I need?
- How will my savings grow?
- Will I be able to retire?
- Future Value Calculator
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To make the most of this calculator, you'll need to know how your retirement savings are invested among the listed asset classes (e.g., stocks and bonds). |
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This calculator is best viewed using the latest version of Microsoft's Internet Explorer or Netscape. Click here for more information on browser requirements. |
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You can print the page to save for future reference, but your data will not be saved online. |
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How will my savings grow?
Retirement Calculator
This retirement calculator tells you what you might expect for an average annual investment return given your
current asset allocation (e.g., 60% stocks, 40% bonds) and based on historical returns. All information and assumptions are based on
historical and standard deviation data. Of course, you can change the asset allocation scenarios and use the
calculator over and over again.
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Note that these results are based on historical averages and are not intended to predict future results. |
| Average historical return of the asset mix you specified above: |
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Low Return |
High Return |
| In any one year |
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| IMPORTANT: The projections or other information
generated by this tool regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect
actual investment results and are not guarantees of future results. |
| What these numbers mean: |
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| Assumptions used: |
| The allocation of a Balanced investment between Stocks and Bonds depends
on the individual investment. Here it is assumed that a reasonable average is 60% invested in Stocks and 40%
invested in Bonds.
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| As a starting point, we considered the historical average annual returns for the three basic asset classes:
Stocks, Bonds, and Cash. We used one broad index for each asset class over the period 1/1/1926 - 12/31/2004.
The indexes used for each of the three main asset classes are as follows:
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| Asset Class |
Index |
| Stocks |
S&P 500 |
| Bonds |
5-year Treasuries |
| Cash |
T-Bills |
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| This tool assumes that the General Accounts class has a historical return equal to Bonds.
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| Domestic equities, international equities, and specialty investments such as real
estate funds are all Stocks. Over the long term, similar returns might be anticipated, but cannot be assured.
For projection purposes, the S&P 500 Index historical returns (back to January 1, 1926)
are used as a proxy for all Stocks.
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| Criteria and Methodology Used: |
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The high and low returns shown above are determined using an assumed
statistical distribution of returns. The statistical distribution used by this tool is the "lognormal" distribution,
which is generally considered to most closely reflect the actual historical distribution of stock
market returns. The assumed distribution is constructed using the specified percentage of portfolio
assets invested in each of the five asset classes (General Accounts, Cash, Bonds, Balanced, and Stocks),
the historical return and standard deviation of each asset class, the historical correlations among the asset
classes, and the number of years the assets are assumed to be invested. The General Accounts class
is assumed to have a standard deviation equal to two-thirds of the historical standard deviation of
the Cash class. The General Accounts class is assumed to have zero correlation with any of the other
asset classes.
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The specified percentage of assets invested in each asset class and
the historical return of each asset class are used to determine the portfolio’s historical average
annual return. The specified percentage of assets invested in each asset class, the historical standard
deviation of each asset class, and the historical correlations among the asset classes are used to determine
the portfolio’s historical standard deviation. The portfolio’s historical return and standard deviation, along
with the number of years the assets are assumed to be invested, are then used to create the assumed lognormal
distribution of portfolio returns. The statistical properties of the lognormal distribution allow us to calculate
a minimum expected return with any given probability. We have defined the "High" return as the return
such that there is a 2.5% chance that the realized average annual return over the investment period would be greater
than or equal to that return, based on the assumed distribution of historical portfolio returns. We have defined the
"Low" return as the return such that there is a 97.5% chance that the realized average annual return over
the investment period would be greater than or equal to that return, based on the assumed distribution of historical
portfolio returns. There is therefore a 95% chance, based on the assumed distribution of historical portfolio returns,
that the actual realized average annual return over the investment period would be between the High and Low returns.
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The assumed distribution of portfolio returns is solely based on historical information, and may not accurately reflect the future distribution of portfolio returns.
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The results may vary with each use and over time. |
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This tool uses only three basic broad asset class category indexes:
Stocks, Bonds, and Cash. This tool does not differentiate by sub-classes (for example, domestic
large cap equities), nor does it separate out specialty classes that may not fit ideally into any of
these three categories (for example, real estate investments are included in the broad Stocks
category for purposes of this tool). Specific investments may have characteristics similar or
superior to the broad asset classes used in this tool.
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