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1. Visit the financial investment calculator at Finance.cch.com. The link is provided in the resources section below. Not only is it one of the simplest financial calculators online, it shows easy to read graphs.
2. Determine how many years until you want to use the money. This is the first box to fill on the investment calculator. Remember, this should be the number of years until you use the money, not necessarily the year you retire.
3. Think about the type of investment vehicle you will use. Stocks and mutual funds typically produce higher rates of return than CDs or traditional bank accounts. In fact, the average yearly rate of return for the S&P 500 from 1970-2007 was more than 11 percent. Many traditional savings accounts yield as low as 1 percent. Input the estimated rate of return in the next box down.
4. Input your initial investment into the next box. If you have money from a rollover, that is your initial investment amount. Then, in the box below that, indicate how much money per year you will invest. If you plan on letting the money sit without contributing a single penny more, put $0.
5. Maintain the default inflation rate given on the website. Finance.cch.com gives an automatic inflation rate of 3.1 percent. This was the average taken from 1925 to 2007. Inflation fluctuates, but 3.1 percent is a good estimate.
6. Put your tax rate into the last box. The default is 15 percent. If you don't know how much you will pay in taxes, leave this number at 15 percent.