401(k) Calculator
A 401(k) can be one of your best tools for creating a secure retirement. It provides you with two important advantages. First, all contributions and earnings to your 401(k) are tax deferred. You only pay taxes on contributions and earnings when the money is withdrawn. Second, many employers provide matching contributions to your 401(k) account which can range from 0% to 100% of your contributions. The combined result is a retirement savings plan you cannot afford to pass up.
Definitions
- Annual Salary
- This is your annual salary from your employer before taxes and other benefit deductions. Since your contribution and company match are based on the salary paid to you by your employer, do not include any income you may receive from sources other than your employer.
- Percent to Contribute
- This is the percentage of your annual salary you contribute to your 401(k) plan each year. Most employers permit employees to contribute up to 15 percent of their salary to a 401(k).
- Annual Contribution Limits
- Your total contribution for one year based on your annual salary times the percent you contribute. However, your annual contribution is also subject to certain maximum total contributions per year. The annual maximum for 2007 is $15,500. This amount is subject to cost-of-living increases after 2007. "Catch-up" provisions for employees over age 50 allow greater contribution. It is important to note that some employees may be subject to other form of contribution limits.
Current Age
- Your current age.
- Age of Retirement
- Age you wish to retire. This calculator assumes that the year you retire you do not make any contributions to your 401(k). So if you retire at age 65, your last contribution happened when you were actually 64.
- Current 401(k) Balance
- The starting balance or current amount you have invested or saved in your 401(k).
- Annual Rate of Return
- The annual rate of return for your 401(k) account. Historically the major stock indexes have averaged 10% to 12% per year. If you plan on withdrawing your money within five years, you may wish to choose a more conservative rate of return. This calculator assumes that your return is compounded annually and your deposits are made monthly.
- Employer Match
- An employer match is in addition to your annual contributions. It is based on a percentage of your annual contributions. This range can be anywhere from 0% to 100%. An employer match is usually only for a limited portion of your salary. Please read the definition for "Employer maximum" for a detailed description.
- Employer Maximum
- This is the maximum percent of your salary matched by your employer regardless of the amount you decide to contribute. For example, lets assume your employer has a 50% match up to a maximum of 6% of your annual salary. If you have an annual salary of $25,000 and contribute 6%, your annual contribution is $1,500. With a 50% match, your employer will add another $750 to your 401(k) account. If you increase your contribution to 10% your annual contribution is $2,500 per year. Your employer match, however, is limited to the first 6% of your salary and remains at $750.
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Information and interactive calculators are made available to you as self-help tools for your independent use. We cannot and do not guarantee their accuracy or their applicability to your circumstances. We encourage you to seek personalized advice from qualified professionals regarding all personal finance and legal issues.
