How to Calculate a Retirement Account

Research your investments carefully.

Calculating future retirement account funds will require estimates of earnings, dividends and life span for periods well into the future. There are several techniques to find a most likely future value of retirement funds based on your current account value. While the results will not be precise, they should be accurate within 10 to 15 percent of the ultimate value.

Instructions

1. Open a spreadsheet program, for example, Microsoft Excel or OpenOffice.org's spreadsheet application. List in column one the amounts of each of your different retirement accounts, such as 401k, Individual Retirement Account (IRA) and simplified employee pension plan (SEP).

2. Enter the current yield of the 10-year U.S. Treasury Bond in column two. See Resources for information on finding current bond rates.

3. Enter the amount entered in column two plus 2 percent in column three. The additional 2 percent represents the historical extra return expected from stocks.

4. Subtract your age from your expected date of retirement and enter it in column four. Remember that in most cases you cannot draw from your retirement plan before you're 59 1/2 years of age, but you must begin withdrawals by age 70 1/2.

5. Multiply for bonds and money market funds the rate in column two by itself. Do this for as many years as was entered in column four. Enter the result in column five. For example: if the rate in column four is 5 percent and you are three years from retirement, multiply: 1.05 x 1.05 x 1.05. For stock holdings, multiply column four by itself for as many years as was entered in column five. Enter the result in column six.

6. Multiply column one by column five for all bond and money market accounts. Enter it in column seven. The result is your retirement holdings for your fixed income portion of your retirement savings. Multiply column one by column six and enter the result in column eight. This is the total value at retirement of your stock portfolios.

7. Add columns seven and eight. This is the sum total of your investment monies. Experiment with different retirement dates and see how deferring retirement adds to total savings. Try using different rates of return and see how a small difference affects the total value of dollars available at retirement.

Tips & Warnings

• Some free online retirement calculators contain errors and omissions. Use two or more programs and compare results.

References

• United States Treasury 10 Year Yield

Resources

• Retirement Calculators