How much will my savings be worth?

Amount you have invested

Your savings rate

Additional deposits

Monthly

Quarterly

Yearly

Years deposited

Your federal tax rate

Your state tax rate

Inflation rate

"How much will my savings be worth?" calculates the future value of your savings plan based on the savings information that you provide. This information includes the amount of your initial lump-sum deposit, number of years to save, frequency of contributions, periodic savings amount, savings interest rate and inflation rate.

Because you enter income tax rates, the calculator assumes you save with a taxable account. If you want to simulate saving with a tax-advantaged account, enter a zero in the fields for federal and state income tax rates.

Inflation rate:The inflation rate is the yearly percentage change in inflation. Inflation is an increase in prices. The annual inflation rate in the U.S. has averaged about 3% in the last 10 years. For example, a basket of goods that costs $103 this year and only $100 last year experienced an annual inflation rate of 3%.

Inflation:Inflation is a general increase in prices that you pay for goods and services, stated as a yearly rate. If the inflation rate is 4%, it means that prices increase at a yearly rate of 4%. For example, the same basket of goods and services that you can buy today at $1,000 will cost you $1,040 next year. Inflation cuts into your purchasing power even further for longer periods. For example, if you have $100,000 today and inflation grows at 4%, it would be worth $82,193 in five years. After 10 years, it would be worth $67,556. The major inflation indexes are updated monthly by the U.S. Department of Labor. The first index is the wholesale price index. It is also called the producer price index (PPI). PPI measures inflation that manufacturers and other producers face. The second index is the consumer price index (CPI). CPI measures inflation that consumers face for goods and services such as food, fuel, and housing. Monthly PPI and CPI figures are reported as a percentage change over the previous month. A series of 12 monthly reports are linked to determine a yearly inflation rate.

Future value:The future value is the amount that your investment grows to in the future. For example, the future value of $100 invested at 8% at the end of each month is $1,245 after 12 months. The present value, or value of this future value in today's dollars, depends on the discount rate. Often, the discount rate used is the same rate as the rate of return, or 8%. The present value of $1,245 discounted at 8% is $1,153. If you were to invest $1,153 today at 8%, this would grow to $1,245 in one year. In other words, you can invest $100 a month for the next 12 months or $1,153 today to obtain the same future value.

Compounded interest:The interest that you earn on a deposit or investment that uses compounding. Banks and financial institutions routinely use compounding to pay you a higher interest rate. For example, a bank may be offering a deposit that pays interest at 10 percent. If the bank does not compound interest, you will receive 10 percent of your investment as interest income at the end of a year. But if the bank compounds interest every three months, you will earn an interest rate of 10.38 percent. If the bank compounds interest monthly, you will earn 10.47 percent. And if it compounds daily, you will earn 10.52 percent. For a deposit of $10,000, this is an extra $52 of interest that you earn.

Lump-sum investments:A lump-sum investment is an investment that you make to open an investment or savings account. It is used to jump-start an investment or savings account. Possible sources of lump-sum investments include inheritances, lump-sum distributions from retirement plans and proceeds from a life insurance policy.

Tax-advantaged account:A tax-advantaged account is an investment account with tax-deferred or tax-exempt features. The Internal Revenue Service authorizes the use of tax-advantaged accounts. These accounts are used to save for retirement or college and other educational expenses. Tax-advantaged accounts are tax-exempt until you take money out of the account. In some cases, distributions are tax-exempt provided the account holder meet certain conditions or the money is spent a certain way. In other cases, the entire amount of the distribution is taxable.

Savings interest rate:The savings interest rate is the yearly interest rate you earn on your savings. It is also used to calculate the opportunity cost of paying with cash. In contrast, the saving rate is the percentage of income you save.

Taxable account:A taxable account is an account that does not receive the tax breaks that either a tax-exempt account or tax-deferred account are eligible to receive. (Both of these accounts are called tax-advantaged accounts. Tax-advantaged accounts are authorized by the IRS as investment vehicles to save for your retirement or the retirements of investors.)