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Are you on track to achieve your investing goals? Plenty of factors go into understanding whether you’ll be able to hit your targets, including your contribution rate, rate of return, taxes and inflation, among others. Forbes Advisor’s investment calculator is designed to help you see whether you’re making the right moves to reach your investing goals.
Below our investment calculator, you can find helpful explanations of the data we need, instructions on how to get the most from the calculator and answers to common questions.
How to Use This Investment Calculator
You’ll want to update our defaults with information that matches your own investment goals and financial situation. Here are more tips to help you get the most out of this calculator.
Include Your Income Tax Rates
While you may not like to think about taxes, you’re almost certainly going to lose some of your investment earnings to Uncle Sam. That’s why it’s helpful to include your federal, state and local tax rates in any investment growth calculations, to get a more realistic picture of what you’ll need to reach your goals.
If you aren’t sure which tax bracket you’re in, check out the federal tax guidelines. Not all states or local governments tax investment earnings, but if yours does you’ll want to include their tax rates—and see whether you’re able to deduct state taxes on your federal return.
To keep things simple, this calculator assumes that you’re cashing out the gains you make each year. You’ll then owe taxes on these earnings based on your current income tax rate.
Investing is a long game, and you shouldn’t cash out every year. That lets you benefit from long-term capital gains tax rates, which are lower but are only available if you hold investment for at least a year.
It’s also important to consider tax rate if you decide to hold your investments in a tax-advantaged retirement account, like an individual retirement account (IRA) or 401(k), which allow you to avoid paying taxes on the earnings you make within the account.
This calculator shows the balances you might have in a taxable account as well as a tax-advantaged account to illustrate the great savings you can accrue with tax-advantaged accounts.
Consider the Role of Inflation
Inflation is when prices rise across the economy and eat away over time at the purchasing power of your …….