Using the Quicken 2006 Retirement Calculator
Imagine that you decide to jump into your employer's 401(k) thing (a type of profit-sharing plan) and that it allows you to plop $6,000 into a retirement account that you think will earn about 9 percent annually. Fortunately, you don't need to be a rocket scientist to figure this stuff out. You can just use the Quicken 2006 Retirement Calculator:
1. Choose Planning --> Financial Calculators --> Retirement Calculator.
The Retirement Calculator dialog box appears.
2. Enter what you've already saved as your current savings.
Move the cursor to the Current Savings text box and type your current retirement savings (for example, if you have some Individual Retirement Account money or you've accumulated a balance in an employer-sponsored 401(k) account).
3. Enter the annual yield that you expect your retirement savings to earn.
Move the cursor to the Annual Yield text box and type the percent.
4. Enter the annual amount added to your retirement savings.
Move the cursor to the Annual Contribution text box and type the amount that you or your employer will add to your retirement savings at the end of each year.
5. Enter your current age.
Move the cursor to the Current Age text box and type a number.
6. Enter your retirement age.
Move the cursor to the Retirement Age text box and type a number.
7. Enter the age to which you want to continue withdrawals.
Move the cursor to the Withdraw Until Age field and type a number. This number is how old you think you'll be when you die. Yeah, it's a pretty grim thought, so let's just say that ideally you want to run out of steam before you run out of money. So go ahead and make this age something pretty old — like 95.
8. Enter any other income you'll receive — such as Social Security.
Move the cursor to the Other Income (SSI, Etc.) text box and type a value. Note that this income is in current-day, or uninflated, dollars.
9. Indicate whether you plan to save retirement money in a tax-sheltered investment.
Select the Tax Sheltered Investment option button if your retirement savings earns untaxed money. Select the Non-Sheltered Investment option button if the money is taxed.
10. Enter your current marginal tax rate, if needed.
If you're investing in taxable stuff, move the cursor to the Current Tax Rate text box. Then type the combined federal and state income tax rate that you pay on your last dollars of income.
11. Enter your anticipated retirement tax rate.
Move the cursor to the Retirement Tax Rate text box, and then . . . hey, wait a minute. Who knows what the rates will be next year, let alone when you retire? You should just type 0, but remember that the Annual Income After Taxes is really your pretax income (just as your current salary is really your pretax income).
12. Enter the anticipated inflation rate.
Move the cursor to the Predicted Inflation text box and type the inflation rate. By the way, in recent history, the inflation rate has averaged just above 3 percent.
13. Indicate whether the annual additions will increase.
Select the Inflate Contributions check box if the additions will increase annually by the inflation rate. (Because your salary and 401(k) contributions will presumably inflate if there's inflation, the Inflate Contributions check box should be selected.)
14. After you enter all the information, click Calculate and peek at the Annual Income After Taxes field.
If you want to see the after-tax income in future-day, inflated dollars, deselect the Annual Income In Today's $ check box but leave the Inflate Contributions check box checked.
To get more information on the annual deposits, balances, income, and so on, click the Schedule button, which appears on the face of the Retirement Calculator dialog box. Quicken whips up a quick little report showing the annual deposits, income, and ending retirement account balances for each year you plan to add to and withdraw from your retirement savings.