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Personal Economic Calculator |
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"Can I recover?" It's not an easy question to answer but to help you answer that question, Lincoln Financial Group has created the Personal Economic Calculator. The calculator allows you to run different investment return scenarios in order to quantify how long it may take you to recover from recent losses. These scenarios are hypothetical calculations that can be helpful as you begin the process of regrouping, rebuilding and regrowing your assets. It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over
time, especially for long-term investments. To get started, enter the values in the boxes below and click "calculate" to see how long it will take to recover from the losses you have recently experienced.
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Definitions
- Original investment
- The amount of your investment before suffering your losses. This is the total you are looking to recover, or eventually have in your account. Please note that the slide is not set to scale but allows for the presentation of smaller numerical increases up to the $50k level and larger increases above that to the $1 million level.
- Current value
- Your current remaining balance after your losses. Please note that the slide is not set to scale but allows for the presentation of smaller numerical increases up to the $50k level and larger increases above that to the $1 million level.
- Additions
- The amount you will contribute each period to your account. This calculator also assumes that you make your contribution at the beginning of each period.
- Expected rate of return
- This is the annually compounded rate of return you expect from your investments. For the purposes of this calculator, taxation is not factored into the results. If you pay taxes on the interest, dividends or capital gains from these investments you may wish to enter your after tax rate of return.
The actual rate of return is largely dependent on the type of investments you select. For example, from December 2000 to December 2010, the annual compounded rate of return for the S&P 500 was 0.899%, including reinvestment of dividends. From January 1970 to December 2010, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.05% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a bank may pay as little as 1% or less but carry significantly lower risk of loss of principal balances. It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.
- Expected inflation rate
- What you expect for the average long-term inflation rate. A common measure of inflation in the U.S. is the Consumer Price Index (CPI). The CPI for 2010 was 2.4%, as reported by the Minneapolis Federal Reserve. From 1925 through 2010 the CPI has long-term average of 3.1% annually. Over the last 30 years highest CPI recorded was 13.5% in 1980.
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