How The Calculations Are Done
Basic Plan
Uses historical averages for stock market returns (10% annually), bond returns (4% annually), and inflation (3.1%). Federal taxes including FICA and Medicare are assumed to remain constant at today's rates. Any surplus is deposited in the Taxed Investment Accounts. Withdrawals are first taken from Taxed Investment Accounts and then PreTax Accounts.
Historical Plan Success Probability
Begins with the market conditions in 1928 and simulates your retirement for the duration of your retirement based on the Life Expectancy. If there is any money left it is considered a success. The same process is repeated for every year. The result that is displayed is the ratio of (successful scenarios)/(total years since 1928).
Probability Of Success By Expenses
Increases the Annual Expenses by $5000 calculates the Historical Probability Of Success. If the Probability is under 100% and above 50% it is displayed in the chart.
Probability Of Success By Retirement Age
Starts at the user's current age and calculates the Historical Plan Probability Of Success and continually increases the Retirement Age by 1 year. The loop will stop once 100% Probability is reached or 15 years.