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Do You Have Enough Saved to Retire?

“How much do I need to have saved to retire?” That’s the million-dollar question – or perhaps a two-million-dollar question now, thanks to inflation. Of course, what savers really want to know is how much they need to have saved when they retire to make sure they can live the lifestyle they want and not outlive their assets. As it turns out, there is no easy or even right answer. The dollar amount that will work for you depends on many variables such as your living expenses, other assets, and tax status. These variables are also affected by conditions outside of your control and impossible to predict, like market volatility and inflation. Fortunately, in addition to working with a financial professional, there are steps you can take to make educated estimates about your retirement savings needs to help make sure you are prepared to fund your retirement.

STRATA offers several financial calculators that can help you plan for how much income you will need in retirement, as well as help you decide how best to achieve your savings and tax-related goals by comparing taxable and tax-advantaged savings options. Each calculator provides detailed explanations of the data used to make the calculations and allows you to change the input data to see how those changes could affect the outcome.

 

Retirement Planning Calculators – NEW!

To estimate how much monthly income your savings may provide you in retirement, plug your annual savings amount, expected rate of return, and current age into the Retirement Income Calculator. This calculator allows you to enter your rate of return both before and during retirement and your tax rates to fine tune the results. You can also see how different rates of inflation will affect your income, which may help you determine if you need to save more now to achieve your goals in retirement.

The Retirement Savings Calculator can help you determine how long your savings will last in retirement by factoring in inflation-adjusted withdrawals and tax rates. For example, a savings balance of $1 million at retirement could provide you with $50,000 annual income (increased each year at a 5% inflation rate) for 20 years (assuming a 5% after-tax rate of return in retirement).

 

IRA Comparison Calculators

Given your unique financial and tax situation, is it better for you to save pre-tax in a Traditional IRA or after-tax in a Roth IRA? STRATA offers four calculators to help you explore the account balance and tax differences you may experience by saving in a Traditional IRA, Roth IRA, or a taxable investment.

If you’re considering making a Roth conversion, you can estimate the change in total net worth at retirement and the tax impact of converting pre-tax retirement assets to a Roth IRA with the Roth IRA Conversion Calculator.

 

Investing and Savings Calculators

Whether you choose to invest in a taxable, tax-deferred, or tax-free savings vehicle can make a significant difference in the taxation of your retirement income. Because we don’t know what tax rates will be in the future, many investors choose to diversify the tax status of their retirement investments now to optimize the tax strategies available to them in retirement. You can use the Taxable vs. Tax-Deferred vs. Tax-Free Investment Calculator to compare traditional savings growth and tax-advantaged growth.

NEW! The Future Value Calculator can be used to calculate the future value of an investment or account. For example, if you have a $100,000 account balance today and plan to invest $500 monthly for the next 15 years until you retire, you could have an account balance of $431,536 when you retire (assuming a 7% rate of return compounded annually).

 

IRA Withdrawal Calculators

You can use the Required Minimum Distribution (RMD) Calculator to determine how much you will be required to withdraw from your tax-deferred accounts for the current year when you reach age 72 (or 70½ if you hit that milestone before January 1, 2020). For example, if you are age 72 in 2022, and your Traditional IRA has an account balance of $250,000, you will be required to withdraw $9,124.09 from your Traditional IRA for 2022.

If you are not yet 59½ but want to withdraw from your Traditional IRA without having to pay the 10% early distribution tax on top of regular income tax, you may want to consider setting up a substantially equal periodic payment arrangement, as allowed under Internal Revenue Code Section 72(t). The 72(t) Withdrawals Calculator will help you calculate your required annual distribution using the three approved calculation methods to help you determine which method will best meet your income needs.

 

Next Steps

If you’re using a calculator to make a change to your retirement savings strategy, be sure to review the full detailed report generated by the calculator and talk to your financial professional to make certain you understand the variables used to arrive at the results. Contact our self-directed IRA experts with questions you may have about saving and investing for retirement in a self-directed IRA.