Retirement

Tax advantaged investment calculator

Calculate investment earnings

The way taxes are applied to an investment can make a huge difference. This tax advantaged investment calculator is designed to help compare a normal taxable investment to two common tax advantaged situations: an investment where taxes are deferred until withdrawals are made, and an investment where taxes are paid on money that goes into the account, but all withdrawals are tax free.

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Retirement

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Definitions

Annual rate of return

This is the annual rate of return you expect from your investments after taxes. The actual rate of return is largely dependent on the type of investments you select. From January 1970 to December 2008, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 9.7% (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, from June 1982 through June 1933. The lowest 12-month return was -39%, which happened twice, once from September 1973 to September 1974 and again from November 2007 to November 2008. 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 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.

Existing balance

Any existing balance for the accounts.

Compensate for tax-deduction

If you check this box the calculator will assume contributions to the tax-deferred investment are tax-deductible when they are made. The calculator will then increase the contribution amount for the tax-deferred investment by the amount required to make the net contribution equal to the investments that have contributions made on an after tax basis.

Years to contribute

Number of years you plan on making contributions.

New contributions

Your periodic contribution. All contributions are assumed to happen at the beginning of the period.

Contribution frequency

The frequency of your contributions. The options are Monthly, Quarterly, or Annually. All contributions are assumed to be made at the beginning of the period.

Years of withdraws

Number of years you plan on taking distributions. Enter "1" for a lump sum distribution. All distributions are assumed to happen at the beginning of the period.

Withdrawal frequency

The frequency of your distributions. The options are Monthly, Quarterly or Annually. All distributions are assumed to be taken at the beginning of the period.

Tax during contributions / withdrawals*

Your estimated marginal tax rate. You can use the table below to assist you in determining your current tax rate.

Filing Status and Income Tax Rates 2008 Caution: Do not use these tax rate schedules to figure 2007 taxes. Use only to figure 2008 estimates.
Tax rate	Married filing jointly or Qualified Widow(er)	Single	Head of household	Married filing separately
10%	$0 - 16,050	$0 - 8,025	$0 - $11,450	$0 - 8,025
15%	$16,051- 65,100	$8,026- 32,550	$11,451- 43,650	$8,026- 32,550
25%	$65,101- 131,450	$32,551- 78,850	$43,651- 112,650	$32,551- 65,725
28%	$131,451- 200,300	$78,851- 164,550	$112,651- 182,400	$65,726- 100,150
33%	$200,301- 357,700	$164,551- 357,700	$182,401- 357,700	$100,151- 178,850
35%	over $357,700	over $357,700	over $357,700	over $178,850

Source: http://www.irs.gov/pub/irs-drop/rp-07-66.pdf

*Lower maximum tax rates on capital gains and dividends would make the investment return for the taxable investment more favorable, thereby reducing the difference in performance between the hypothetical investments shown. Investors should consider their personal investment horizon and income tax bracket, both current and anticipated, when making an investment decision, as these may further impact the comparison.

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 in regard to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

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