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401(K) SAVINGS AND PLANNING CALCULATOR


THE MORE YOU SAVE AND THE LONGER YOU SAVE, THE MORE YOU'LL HAVE AVAILABLE TO
SPEND IN RETIREMENT

AARP, Updated June, 2023






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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and earnings when the money is withdrawn.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. The combined result is a
retirement savings plan you cannot afford to pass up.
JavaScript is required for this calculator. If you are using Internet Explorer,
you may need to select to 'Allow Blocked Content' to view this calculator.

For more information about these financial calculators please visit:
Dinkytown.net Financial Calculators from KJE Computer Solutions, Inc.


By changing any value in the following form fields, calculated values are
immediately provided for displayed output values. Click the view report button
to see all of your results.



Financial Calculators from
Dinkytown.net

Financial Calculators ©1998-2023 KJE Computer Solutions, Inc.









Your total is $756,476.60 after 35 years.
*indicates required.


401(K) EMPLOYEE SAVINGS PLAN:




Percent to contribute:*This entry is required.Enter an amount between 0% and
100%?


PERCENT TO CONTRIBUTE

This is the percentage of your annual salary you contribute to your 401(k) plan
each year. Your annual 401(k) contribution is subject to maximum limits
established by the IRS. The annual maximum for 2023 is $22,500. If you are age
50 or over, a 'catch-up' provision allows you to contribute an additional $7,500
into your account. The SECURE 2.0 Act of 2022 adds an additional catch-up
provision starting in 2025. The current calculator does not include this new
catch-up contribution. The new special catch-up contribution, when you are age
60 to 63, allows an additional contribution of $10,000 or 150% of the standard
catch-up contribution limit from 2024 (whichever is higher). The $10,000 maximum
is adjusted for inflation starting in 2026. Employer contributions do not count
toward the IRS annual contribution limit.

Employees classified as "Highly Compensated" may be subject to additional limits
based on their employer's overall 401(k) participation. If you expect your
salary to be $150,000 or more in 2023 or was $135,000 or more in 2022, you may
need to contact your employer to see if these additional contribution limits
apply to you.

0%
33%
67%
100%
Annual salary:*This entry is required.Enter an amount between $0.00 and
$1,000,000.00?


ANNUAL SALARY

This is your annual salary from your employer, before taxes and other benefit
deductions. Since your contribution and employer 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.

$0
$10k
$100k
$1m
Annual salary increase:*This entry is required.Enter an amount between 0% and
12%?


ANNUAL SALARY INCREASE

The annual percentage you expect your salary to increase. The calculator assumes
that your salary will continue to increase at this rate until you retire.

0%
4%
8%
12%
Current age:*This entry is required.Enter an amount between 15 and 90?


CURRENT AGE

Your current age.

15
40
65
90
Age at retirement:*This entry is required.Enter an amount between 10 and 90?


AGE AT RETIREMENT

Age at which you plan to retire. This calculator assumes that the year you
retire, you do not make any contributions to your 401(k). For example, if you
retire at age 65, your last contribution occurs when you are actually 64.

10
37
63
90
Current 401(k) balance:*This entry is required.Enter an amount between $0.00 and
$10,000,000.00?


CURRENT 401(K) BALANCE

The starting balance or current amount you have invested or saved in your
401(k).

$0
$100k
$1m
$10m
Annual rate of return:*This entry is required.Enter an amount between 0% and
20%?


ANNUAL RATE OF RETURN

The annual rate of return for your 401(k) account. This calculator assumes that
your return is compounded annually and your deposits are made monthly. The
actual rate of return is largely dependent on the types of investments you
select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December
31st 2022, had an annual compounded rate of return of 12.6%, including
reinvestment of dividends. From January 1, 1970 to December 31st 2022, the
average annual compounded rate of return for the S&P 500®, including
reinvestment of dividends, was approximately 10.7% (source: www.spglobal.com).
Since 1970, the highest 12-month return was 61% (June 1982 through June 1983).
The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts
at a financial institution may pay as little as 0.25% or less but carry
significantly lower risk of loss of principal balances.

It is important to remember that these scenarios are hypothetical and that
future rates of return can't be predicted with certainty and that investments
that pay higher rates of return are generally subject to higher risk and
volatility. The actual rate of return on investments can vary widely over time,
especially for long-term investments. This includes the potential loss of
principal on your investment. It is not possible to invest directly in an index
and the compounded rate of return noted above does not reflect sales charges and
other fees that investment funds and/or investment companies may charge.

0%
4%
8%
12%
Total employee contributions:
$140,000.00



401(K) EMPLOYER MATCH:




Employer match:*This entry is required.Enter an amount between 0% and 400%?


EMPLOYER MATCH

The percentage of your annual 401(k) contributions your employer will match.
These contributions are often capped. Please read the definition for "Employer
maximum" for more information. Also note employer contributions do not count
toward the IRS annual contribution limit.

Matching contributions can also be subject to a vesting schedule. See your plan
information for details.

0%
134%
267%
400%
Employer match ends:*This entry is required.Enter an amount between 0% and 100%?


EMPLOYER MAXIMUM

This is the maximum percent of your salary matched by your employer, regardless
of the amount you decide to contribute.

For example, let's assume your employer provides a 50% match on the first 6% of
your annual salary that you contribute to your 401(k). If you have an annual
salary of $100,000 and contribute 6%, your contribution will be $6,000 and your
employer's 50% match will be $3,000 ($6,000 x 50%), for a total of $9,000. If
you only contribute 3%, your contribution will be $3,000 and your employer's 50%
match will be $1,500, for a total of $4,500.

If you increase your contribution to 10%, you will contribute $10,000. Your
employer's 50% match is limited to the first 6% of your salary then limits your
employer's contribution to $3,000 on a $100,000 salary. The total 401(k)
contribution from you and your employer would therefore be $13,000.

0%
33%
67%
100%
Total employer contributions:
$42,000.00

401(k) Balance by Year Column Graph: Please use the calculator's report to see
detailed calculation results in tabular form.


401(K) BALANCE BY YEAR




Your total is $756,476.60 after 35 years.



DEFINITIONS


PERCENT TO CONTRIBUTE

This is the percentage of your annual salary you contribute to your 401(k) plan
each year. Your annual 401(k) contribution is subject to maximum limits
established by the IRS. The annual maximum for 2023 is $22,500. If you are age
50 or over, a 'catch-up' provision allows you to contribute an additional $7,500
into your account. The SECURE 2.0 Act of 2022 adds an additional catch-up
provision starting in 2025. The current calculator does not include this new
catch-up contribution. The new special catch-up contribution, when you are age
60 to 63, allows an additional contribution of $10,000 or 150% of the standard
catch-up contribution limit from 2024 (whichever is higher). The $10,000 maximum
is adjusted for inflation starting in 2026. Employer contributions do not count
toward the IRS annual contribution limit.

Employees classified as "Highly Compensated" may be subject to additional limits
based on their employer's overall 401(k) participation. If you expect your
salary to be $150,000 or more in 2023 or was $135,000 or more in 2022, you may
need to contact your employer to see if these additional contribution limits
apply to you.


ANNUAL SALARY

This is your annual salary from your employer, before taxes and other benefit
deductions. Since your contribution and employer 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.


CURRENT AGE

Your current age.


AGE AT RETIREMENT

Age at which you plan to retire. This calculator assumes that the year you
retire, you do not make any contributions to your 401(k). For example, if you
retire at age 65, your last contribution occurs when you are 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. This calculator assumes that
your return is compounded annually and your deposits are made monthly. The
actual rate of return is largely dependent on the types of investments you
select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December
31st 2022, had an annual compounded rate of return of 12.6%, including
reinvestment of dividends. From January 1, 1970 to December 31st 2022, the
average annual compounded rate of return for the S&P 500®, including
reinvestment of dividends, was approximately 10.7% (source: www.spglobal.com).
Since 1970, the highest 12-month return was 61% (June 1982 through June 1983).
The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts
at a financial institution may pay as little as 0.25% or less but carry
significantly lower risk of loss of principal balances.

It is important to remember that these scenarios are hypothetical and that
future rates of return can't be predicted with certainty and that investments
that pay higher rates of return are generally subject to higher risk and
volatility. The actual rate of return on investments can vary widely over time,
especially for long-term investments. This includes the potential loss of
principal on your investment. It is not possible to invest directly in an index
and the compounded rate of return noted above does not reflect sales charges and
other fees that investment funds and/or investment companies may charge.


ANNUAL SALARY INCREASE

The annual percentage you expect your salary to increase. The calculator assumes
that your salary will continue to increase at this rate until you retire.


EMPLOYER MATCH

The percentage of your annual 401(k) contributions your employer will match.
These contributions are often capped. Please read the definition for "Employer
maximum" for more information. Also note employer contributions do not count
toward the IRS annual contribution limit.

Matching contributions can also be subject to a vesting schedule. See your plan
information for details.


EMPLOYER MAXIMUM

This is the maximum percent of your salary matched by your employer, regardless
of the amount you decide to contribute.

For example, let's assume your employer provides a 50% match on the first 6% of
your annual salary that you contribute to your 401(k). If you have an annual
salary of $100,000 and contribute 6%, your contribution will be $6,000 and your
employer's 50% match will be $3,000 ($6,000 x 50%), for a total of $9,000. If
you only contribute 3%, your contribution will be $3,000 and your employer's 50%
match will be $1,500, for a total of $4,500.

If you increase your contribution to 10%, you will contribute $10,000. Your
employer's 50% match is limited to the first 6% of your salary then limits your
employer's contribution to $3,000 on a $100,000 salary. The total 401(k)
contribution from you and your employer would therefore be $13,000.

--------------------------------------------------------------------------------

Information and interactive calculators are made available to you as self-help
tools for your independent use and are not intended to provide investment
advice. We cannot and do not guarantee their applicability or accuracy in
regards to your individual circumstances. All examples are hypothetical and are
for illustrative purposes. We encourage you to seek personalized advice from
qualified professionals regarding all personal finance issues.


WHAT’S A 401(K)?

It’s a retirement savings plan named after the section of the tax code that
authorizes it, and typically offered by for-profit corporations. Those who work
for nonprofit organizations may have a similar plan, called a 403(b). Both allow
you to contribute regularly to the plan via payroll deduction and to defer
paying taxes until you withdraw the money in retirement.

A 401(k) plan offers a menu of investments, typically mutual funds, although
some 401(k) plans have a brokerage option that lets you invest in individual
stocks. Most plans offer stock, bond and money market funds, as well as funds
that invest in all three categories. It’s up to you to decide how to invest your
contributions. 


WHAT’S SO GREAT ABOUT A 401(K) FOR RETIREMENT PLANNING?

Quite a few things. Having your contributions taken out regularly is more
convenient than having to write a check to banks or investment firms every so
often. That makes it more likely that you will continue to save, which makes it
more likely you’ll have enough money to retire when the time comes.

But there’s more. Your contributions aren’t counted as income for taxes, which
reduces your annual tax bill. For example, if you earn $50,000 a year and
contribute $5,000 of your salary to a 401(k), you’ll shelter $5,000 from state
and federal income taxes that year. If you’re in the 20 percent combined state
and federal tax bracket, that will reduce your tax bill by $1,000. 

Your earnings also won’t be taxed until you withdraw them. In a regular
brokerage account, you’ll owe taxes on income and capital gains the year in
which you receive them. A 401(k) allows your earnings to grow tax-free for as
long as you keep the money in your account.

The tax deduction also means that your paycheck won’t be hit as much as it would
without a 401(k). If you earn $50,000 a year, for example, you would need to
save $417 a month before taxes to have $5,000 saved at the end of a year. If you
saved that money in a 401(k), however, you would still contribute $417 a month,
but your paycheck would be reduced by just $333 a month, because you’ve reduced
your tax bill by more than $83 each month.

And investing regularly gives you the advantage of dollar-cost-averaging,
meaning that you buy more shares of your funds when the price is low, and fewer
shares when the price is high. Just as a smart shopper buys an extra bag of
potato chips when they are on sale, you’re buying more shares of stock when
they’re on sale. 


WHAT IS AN EMPLOYER 401(K) MATCH?

Some companies will also chip in to your 401(k). This is free money, and, as any
financial advisor will tell you, free money is good. Suppose, for example, your
employer matched every dollar you contributed with 50 cents, up to 5 percent of
your salary. If you make $50,000 and save 5 percent, or $2,500, your employer
would pitch in $1,250. Even if you earned nothing on your investments, your
employer match would mean a 50 percent gain on your contributions — a level that
would make hedge-fund managers green with envy.

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WHAT ARE THE 401(K) CONTRIBUTION LIMITS IN 2023?

In 2023, you can contribute $22,500 to a 401(k). Those who are 50 years or older
can invest $7,500 more, or $30,000. Anything your company contributes is on top
of that limit.  

There is an upper limit to the combined amount you and your employer can
contribute to defined 401(k)s. For those age 49 and under, the limit is $66,000
in 2023, up from $61,000 in 2022. For those 50 and older, the limit is $73,500
in 20232, up from $67,500 in 2021. You can’t contribute more than your earned
income in any year.


CAN I BORROW FROM MY 401(K)?

If your plan allows it, yes. You can borrow up to $50,000 (or 50 percent of your
vested balance) from your 401(k). Plans typically allow up to a five-year
repayment period. You’ll pay interest on the loan, but you’ll pay it to
yourself, rather than the bank. 

The drawback: If you lose your job, you’ll have to repay the loan by that
year's federal tax deadline. If you don’t, the loan will be considered a
withdrawal. You’ll owe taxes on the amount of the loan you didn’t repay. If you
are younger than age 59½, you’ll also owe a 10 percent early withdrawal
penalty. 

ALSO OF INTEREST

 * 7 Steps to start saving for retirement after 50
 * 5 things you need to know about finances when turning 65
 * Early retirement: The FIRE movement


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