- 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 is 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 2008 is $15,500. Starting at age 50 or older, a "catch-up" provision allows you to contribute an additional $5,000 into your 401(k) account. It is also important to note that employer contributions do not affect an employee's maximum annual contribution limit.
It is important to note that some employees are subject to another form of contribution limitations. Employees classified as "Highly Compensated" may be subject to contribution limits based on their employer's overall 401(k) participation. If you expect your salary to be above $100,000, you may need to contact your employer to see if these additional contribution limits apply to you.
- 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. 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 type of investments you select. From January 1970 to December 2007, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 11.4% per year (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, and the lowest was -39%. Savings accounts at a bank may pay as little as 1% or less.
It is important to remember 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 funds and/or investment companies may charge.
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%.
For example, let's assume the employer matches 50% of the employee's contributions up to 6% of their salary. The employee earns $100,000 per year and contributes 10%. The results would be:
- $10,000 from the employee
- $3,000 from the employer (which is 50% of $6,000 or 6% of the annual salary).
- Total: $13,000
Please read the definition for "Employer maximum" for a detailed description of maximum employer matching contributions. It is also important to note employer contributions do not affect the maximum amount allowed to be contributed by an employee.
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, let's 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 $1500. 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 $2500 per year. Your employer match, however, is limited to the first 6% of your salary and remains at $750.
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