Find out the value of your 401k retirement account
A 401(K) plan is a great savings tool that has many benefits. Our calculator can help you plan your deposits to meet your savings goal. You just have to add a few details about your 401k account. Knowing the future value of your savings can be useful for your retirement planning. Let’s begin with what this calculator may be used for, and how you may use it.
Your 401(k) savings plan
A 401(K) plan is tax-advantaged savings account. It is offered through your employer for your retirement. The money you contribute grows tax-free until you leave the workforce.
All 401k plans are tied to investments. A brokerage firm, insurance or mutual fund company preselects those investments for you. This way your account balance can grow based on your rate of return. With the help of compound interest you can watch your savings multiply.
Taking part in a 401k program can be beneficial. The money you put into your 401(k) plan is taken from your income before tax. By reducing your taxable income, you can save money on your next tax filing. However, there are some limits on how much you can deposit into the account each year.
There is a further benefit when you have the option of profit sharing. Through profit sharing, your employer can put additional money into your savings account. Their match is usually a percentage of your annual income. By not participating, you could be missing out on income that your company wants to give you for retirement.
Plan limits, provisions, penalties, and taxes
The IRS is responsible setting out the contribution limits on 401(K) plans. They adjust 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. This does not include employer matching.
If you are over 50, there is a provision that allows you to contribute an extra $6,000 per year. This additional allowance is called a catch-up contribution.
Annual employer additions cannot exceed 100% of the participant’s compensation or $54,000 – $60,000. The higher end of the limit is if catch up contributions apply.
There is a 10% penalty if you take your funds before the age of 59 ½, or if the account is less then five years old. Unless you enforce rule 72t to take early payments.
How much should you be contributing?
It is best to contribute as much as you can to your 401(K) account, or at least enough to get employer matching. It is even recommended to max out your contributions whenever possible. Current and future generations have to rely on their assets to draw income at retirement.
Pension plans no longer exist. Employees can’t fall back on their employers to provide a steady income after retirement anymore. Instead, employers have implemented the 401k program as an alternative security. Your 401k earnings can be combined with your social security to supplement your income when you retire.
Advances in modern medicine are increasing life expectancy. This means time in retirement is rising as well. The longer you will be in retirement, the more funds you will require. Increased longevity makes this workforce saving program even more critical to invest in.
What is this calculator for?
The 401k savings calculator is designed to show you the future value of your 401k account. It just requires some details about the contributions to the plan, your balance, and rate of return.
When you are using this calculator, it is assumed that your interest is compounded yearly. The amount of income from your investment depends on your portfolio.
How to use the calculator
The 401(K) savings calculator has two parts: an information intake and integrated results. You will need to provide some basic details about yourself to get started. Let’s go over this together.
401(K) employee savings plan
Step 1: When you know how much you can deposit into your 401k, you should add the percent to contribute on the first line. This is the percentage of your annual income that will be put in your savings. Once you decide how much to contribute, your employer will arrange fund transfers before providing your pay.
Step 2: On the second line of the calculator, include your annual salary. Any yearly salary increases can be added it to line three.
Step 3: You can add your current age to the fourth line of the calculator. Using the arrow keys can make this input even easier for you.
Step 4: On the fifth line of the calculator, document your planned age of retirement.
Step 5: You should add your current 401(K) balance to the sixth line.
Step 6: Include the annual rate of return you expect on your investment on the seventh line. Your HR department should provide this information to you.
Step 7: You can add your employer profit share on line eight. Indicate this figure as a percentage of your annual salary. Most employers provide a match if you make a specific contribution amount. This amount will vary between employers.
To the right of inputs, you can view a smart summary of your initial account values.
Here you are provided with the value of your employee contributions, along with your employer’s profit sharing.
Directly below the inputs is your account total after contributions and investment growth. This is the earnings you will have for your retirement. If this figure falls short of your needs, you may have to make some changes to your plan. You should consider increasing your contributions or reducing your expenses in retirement. You may even want to think about retiring later.
The first results tab shows the growth of your 401(K) savings. Here you can see your contributions with employer matching in blue and without profit sharing in green. It is always worth contributing enough into your 401(K) account to receive full employer matching.
The next tab, 401(K) balance by year, summarizes the annual growth of your account. Here you can clearly view the balance of your account each year.
Now that you know the potential of your 401(K) plan you can tailor your deposits to your goals. Try out different contributions and maturities to see how much more you can save. The program will provide better tax breaks as you contribute more.
Remember bookmark the 401(K) savings calculator. You can save it to the home screen of your smartphone and return as your situation changes. If you found this page useful, you can promote us on social media and encourage smart retirement planning.