Inflation & Tax Adjusted Savings Calculator
Have you been making periodic investments? And are you wondering what the future value of your investment account will be? Well, you’re in luck. This calculator can help you determine the after-tax future value of your periodic investments.
First enter your initial investment. Then from one of the different investment intervals (like daily, weekly, monthly, quarterly, or annually), choose the amount of the periodic investment you’ve been making. Then enter the annual interest rate, the number of years you plan to let your investment mature, your combined federal and state tax rate, and the expected average annual inflation rate.
Press CALCULATE and you’ll instantly see what the future holds. This includes gross future value, after-tax future value, and after-tax future value when accounting for inflation.
Today's Cambridge Savings Rates
The following table shows current rates for savings accounts, interst bearing checking accounts, CDs, and money market accounts. Use the filters at the top to set your initial deposit amount and your selected products.
Understanding the Future Value of Your Savings After Inflation
If you've ever seen a financial planner or heard a discussion on how to plan for a successful financial future, more than likely you're aware of how important saving money is. Why exactly is this so important and what goes into the future value of your savings? Are there ways to calculate the future value of your savings? How does inflation and taxes affect those savings?
Savings Account Basics
Before answering the above questions, it is good to first understand the basics of savings accounts. A savings account helps people keep excess cash in a secure place. More often than not, this is usually done at a bank or a credit union. The main purpose behind having a savings account is not spending what is there.
With most savings accounts, when an account holder makes more than a certain amount of withdrawals or transfers, there is usually some type of fee or the bank may choose to close the account. This is an incentive for account holders not to touch the money deposited into the savings account. There are other types of savings accounts where you can't touch the money until a certain amount of time has passed.
Another important aspect of savings accounts is that money in the account accrues interest. This is the primary function of the account, so you will want to make sure you choose a savings account with the best interest rate. By understanding this concept, you will realize that the present amount of money you have can actually increase in the future, thus becoming the future value of your savings.
Other types of savings plans can include money market accounts and certificates of deposits (CDs). Both of these types of savings plans also work by accruing interest.
Calculating Future Value of Savings with Interest
As mentioned above, one way to increase your savings is by putting it into an account that accrues interest. There are many things to consider when trying to find a savings account that will get you the best return on your investment. Besides the interest rate, you will need to consider these factors when finding the best kind of savings account:
- Service fees
- Minimum balances
- Age of the account holder
- Penalties for withdrawals
- Minimum deposit amount
Let's say you have found a type of savings account that fits all of your needs. How then do you calculate the future value of your savings with interest?
- Amount in savings: $2000
- Interest rate: 5 percent
On interest rate earned annually, you can figure out how much you will earn in interest. Your formula would look like this:
- .05 x $2,000 = $100
This means you have earned $100 in interest so your new balance is $2,100. This is the calculation you would use if you have an account earning simple interest on a fixed amount. If you have a savings account that earns compound interest, you will earn interest on the entire balance of the account, including interest that has already accumulated.
Calculating Future Savings After Inflation and Taxes
Unfortunately, there are outside factors beyond your control that will have an effect on how much you can earn when saving money. One is inflation, which is when the price of goods and services increases. When inflation rises, the purchasing power of the dollar decreases. If you are trying to figure out exactly how inflation and taxes will affect your savings, you will need to know the following information:
- The amount you have invested
- How much you will put in each month
- How many months you plan to invest your money
- Interest rate
- Federal tax rate
- State tax rate
- Estimated inflation rate
If you have a savings account that is tax-free, you don't have to worry about the federal or state tax rates. If you are wondering about the rate of inflation, you will need to know that historically the average inflation rate is 3 percent.
Saving to Attain Financial Success
There are many reasons people should have some type of savings plan. Whether you are saving money for school, retirement, an emergency fund, or a home, experts recommend starting sooner in life instead of later. The longer you save money, the more interest you can gain. The amount to put into savings depends on what you are saving up for. Generally, financial planners say you should try to put at least 10 percent of your gross pay into savings. No matter what you do, by understanding the future value of your savings, you will be setting yourself up for financial success.
How will you start saving?
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