How RothNest calculates your projections
How RothNest calculates your projections
RothNest uses a simulation-based approach to project your investment outcomes, supporting both annual and monthly compounding depending on user preference. Each projection runs the compounding loop for every year (or month) in your horizon, accumulating balances using the specified growth rate to reflect time value and market assumptions.
Contributions are modeled explicitly, applied at each step—either annually or monthly—according to your input. RothNest applies distinct tax logic for Roth and Traditional accounts, meaning balances and withdrawals reflect the correct post-tax or pre-tax status inherent to your selections.
Your entered employee contribution percentage is modeled each pay period, along with any employer match as defined by the plan. Employer match logic follows the standard structure: the tool calculates matches up to a given percentage of pay, and applies caps if you indicate them.
All contributions—employee and employer—are applied as new deposits at the start of each modeled period. When cap thresholds are reached or stop conditions are met (such as maxing out your contribution setting), further contributions cease for the remainder of the simulation.
This approach ensures that total annual deposits and their timing are consistent with real-world plan mechanics, capturing both individual and matching components precisely for scenario analysis.
RothNest lets you select annual or monthly compounding. Compounding frequency impacts how often growth is applied: monthly compounding compounds twelve times a year, while annual compounds once.
Growth rate is applied at the interval you select. Annual rates are divided by 12 if you choose monthly compounding, so each period uses a fractional rate. Over decades, more frequent compounding, even with small rate adjustments, increases the ending balance substantially—this highlights the power of compound growth.
Compounding frequency and timing are central to accurate long-term projections, especially for horizon analyses stretching 20 years or more. RothNest models these mechanics directly, letting you see the effect.
Roth account withdrawals are assumed tax-free if distributions are qualified, while Traditional account withdrawals are taxed at your retirement tax rate as entered or specified.
All model outputs display Roth and Traditional balances net of their respective tax logics. Traditional balances are shown as pre-tax, but the final calculation adjusts for post-tax outcomes.
Because Roth and Traditional balances represent fundamentally different after-tax values, direct comparison of raw balances can mislead. Instead, the tool focuses on your likely net spending power.
RothNest calculates real, inflation-adjusted returns by discounting projected balances using your provided inflation rate. This shows your future balance in today’s dollars, giving you an accurate sense of purchasing power.
Including inflation is essential for realistic long-term planning, as it accounts for the erosion of money value across decades. This makes the projections more actionable for retirement decision-making.
Limitations & transparency
Limitations & transparency
This calculator is a simplified model and makes assumptions to clarify complex rules. It excludes annual IRS contribution limits, does not model Required Minimum Distributions (RMD) or early withdrawal penalties.
All projections omit certain real-world behaviors, exceptions, or plan variations. The tool also assumes static rates and consistent contribution timing with no mid-period changes.
This tool is for informational purposes only and does not constitute financial advice. Always consult a qualified professional before making financial decisions.
Apply these assumptions to your scenario.
Apply these assumptions to your scenario.