This tool can help you estimate your IRP. The following will help you understand the tool as you navigate through it.
When entering the tool be aware:
- It initially captures some data/variables from your current retirement modeling session.
- The IRP will already have been adjusted downwards from 100% to take into account known expenses that you will not have in retirement, namely:
- Social Security payroll taxes
- Your retirement savings contributions (we assume you will be saving at the current rate that appears in the modeler up until you retire)
- The 80% default used in the retirement modeler is a “rule of thumb” average. This tool will help you develop your own personal IRP.
For each variable read the help (?) to understand what it means and how it may affect your outcome; adjust each one according to your expectations of how your spending will change once you retire.
Other notes about the calculations:
- Federal, State, and Local Taxes: Federal and State Income taxes are dependent on what you actually have as income at retirement and the tax code at that time. This estimator assumes your tax bracket remains the same, the tax code remains the same, and your taxes the same percentage of pay now as when you retire.
- Payroll Taxes: You will no longer have to pay FICA taxes once you are retired unless you have some form of earned income. This payroll tax reduction is taken into account in this estimator.
- Inflation: Inflation is assumed to be equal to the lesser of 2 percent or the Pay increase rate.