401(k) Savings with Profit Sharing Calculator

Maximize your 401k retirement savings with profit sharing

A 401(K) plan is a great savings tool that has many benefits and having a calculator can help you measure your potential retirement savings easily. By factoring in contributions, the age you plan to retire, and the growth of your investments, you can easily estimate the balance of your 401(k)- something that may be helpful to ensure comfortable years later in life. Lets begin by reviewing what this calculator may be used for then continue on to how you may actually use it.

Your 401(k) savings plan with profit sharing
A 401(K) plan is a pension plan that is offered by most employers as a method for employees to increase their savings for retirement and is extremely beneficial. Any contributions to a 401(k) savings account are made pre-tax, which means that any annual contributions to a 401(K) savings plan will reduce your income before taxes, resulting in fewer taxes owed.
Your employer sponsored 401(K) plan may also offer profit sharing.  Through profit sharing employers can offer a level of matching contributions to your 401(K) savings plan, which is usually a percentage of your annual income if you meet a minimum contribution limit. Therefore, if you aren’t contributing to a 401(K) plan you are effectively turning down money that someone wants to give you for your retirement.
However, these compounding factors can make it difficult to estimate how much a 401(K) savings plan with profit sharing may be worth. Please continue reading to learn more about 401(K) plans with profit sharing, and a guide to use the calculator.
401(K) plan with profit sharing limits, provisions, penalties, and taxes
The IRS is responsible setting out the contribution limits on 401(K) plans and adjusts these limits regularly for inflation. The IRS also sets out any guidelines for provisions, taxes, and penalties.
  • Currently employee contribution limits are set to $18,000 per year since 2015, not including profit sharing through employer matching.
  • Annual employer additions cannot exceed 100% of the participants compensation or $54,000 - $60,000 (if catch up contributions are applicable).
  • If you are over 50 there is a provision that allows you to contribute an extra $6,000 per year as a catch up contribution for your retirement.
  • Due to contributions being tax deferred, withdrawals are considered ordinary income and will be subject to the applicable marginal taxation rates.
  • A 10% penalty may apply if you take our your funds before the age of 59 ½, or if the account is aged less then 5 years.
Using the 401(K) savings with profit sharing calculator
The 401(K) savings with profit sharing calculator is very simple and straightforward to use. However, in order to be used effectively it requires knowledge of your planned contributions, age of retirement, current 401(K) balance, investment returns, and the expected amount of employer profit sharing.
How much should you be contributing to your 401(K) savings plan?
While individual circumstances may vary, it is best to contribute as much as you possibly can to your 401(K) account, or at least enough to get full employer matching. Further, it is recommended to max out your contributions to your 401(K) whenever possible. Future generations will need to rely mostly on their own assets to draw income at retirement for a number of reasons.
Due to the absolution of most pension plans employees can no longer fall back on employers to provide a steady income stream after retirement. Instead employers have optionally implemented these 401(K) programs as an alternative for retirement security when combined with social security benefits.
Even though social security benefits will be available at your retirement the value of social security will decrease as more baby boomers reach retirement. With so many retirees’ to provide benefits for and the diminishing numbers in the work force, these entitlement programs will be modified to provide at least some benefit to everyone for the rest of their retirement years.
Thanks to modern medicine life expectancy is increasing which means years in retirement are increasing as well. The longer you will be in retirement, the more funds you will require- making these retirement programs even more important to invest in.
How to use the 401(K) savings plan with profit sharing calculator
The 401(K) savings plan with profit sharing calculator is divided into two segments: an information intake summarizing your 401(K) employee savings plan, and integrated results of your 401(K) savings and balances by year
401(K) employee savings plan
1. Once you know how much you want to provide to your plan you should add the percent to contribute on the first line of the calculator. This is the percentage of your annual income that will go towards your savings.
2.On the second line of the calculator include your annual salary, and any annual salary increases you may be entitled to on line three.
3. Next you can add your current age to the fourth line of the calculator, using the arrow feature to make this selection even easier.
4. On the fifth line of the calculator document your planned age of retirement.
5. Then, you should add your current 401(K) balance to the sixth line.
6. Include the annual rate of return you expect on your investment on line seven.

When you are using this calculator, it is assumed that your income is compounded per annum. The amount of definite income from your investment greatly depends on your investment portfolio. For example, the average annual rate of return of last 43 years of the S & P 500 is about 10.1%. This return of the S & P 500 includes reinvestment of dividends, while banks can pay as little as of 0.25% or even less in saving accounts.

7. Finally, you should add your employer profit share percentage based on your annual salary on line eight. Most employers do offer a match if you can afford to reach a certain contribution limit, but this will vary.

Once this information is added to the calculator, you may proceed to view your results

Your 401(K) savings with profit sharing results
Immediately to the right of the information intake you will receive a general information prompt.

401k profit sharing

Here you are provided with a summary of the total profit sharing, which is your employers contribution your retirement plan, along with your total employee contribution just below.

401k total

Then directly below the information intake is the total of your 401(K) retirement plan after your contributions, profit sharing, and investment growth. This is the savings you will have for your retirement.

401K graph

Viewing the first tab of the integrated reports is the growth of your 401(K) savings. Here you can see how your contributions and employer matching will grow in blue, compared to contributions without profit sharing in green. Therefore it is always worth contributing enough into your 401(K) account to receive your full employer matching as a little can go a long way.

401k chart

While the next tab over, 401(K) balance by year, summarizes the exact yearly growth of your 401(K) account and provides your balance after profit sharing.
Now that you know the potential value of your 401(K) plan you can manipulate your contribution strategies to greater amounts or potential maximums to see exactly how much you can accumulate for your retirement. This may motivate you to ensure security for your future years- with some planning ahead this can be easy task. Don’t wait to depend on social security benefits if you have an employer that is willing to fund your retirement at no extra cost.
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