This calculator was developed to help users estimate the value of a traditional 401k retirement savings plan, with the option to include employer matching deposits. It provides you with the chance to see how much money you will have going into retirement, which can be helpful for your retirement planning.

From your results you can gain some insight on how best to structure your contributions. For example, if your savings balances falls short of your expectations, you may want to consider tweaking your approach. Small changes like increasing your contributions, selecting different investments, or retiring later can greatly affect your saving potential.

A 401K plan is a deferred-contribution plan that is offered through the corporate workplace. The employer-sponsored program allows participants to make deposits before or after tax for their retirement. To help your funds multiply, the program comes with various investment options pre-selected by your plan administrator. 401k plans were created to replace pension plans, which are becoming less customary.

There are many benefits to a 401K program that make it a worthy investment. Contributions can be made before tax, which means any funds you add to the account will reduce your taxable income. This allows you to save you money on your tax filing while helping you save for retirement.

Another defining feature of traditional 401k plans is that your deposits and earnings grow tax-free with the help of interest compounding. When compared to basic savings account, the returns on a 401K are much higher due to the accompanying investments.

In some cases, you can get additional funding from your employer through profit sharing. If your employer offers profit sharing, they can make additional contributions to your account based on your program setup. Many employers will provide matching contributions up to a percentage of your income.

The IRS establishes the rules and limitations concerning 401k programs. They regularly adjust contribution limits for inflation. Typically, these adjustments are made yearly in 500 dollar increments.

As of 2018, employee contributions are limited to $18,500 per year.

If you are over 50 years old, there is a provision called catch up contributions, which allows you to deposit an extra $6,000 per year raising the limit to $24,500.

When you have profit sharing, the combined deposits cannot exceed $55,000 – $60,000. The latter is if you are eligible for catch-up contributions. Annual employer additions also cannot exceed 100% of your compensation.

When it comes to withdrawing your earnings, there are some basic guidelines. The funds must remain in the account until you are 59½ or a minimum of 5 years – whichever is greater.

If you try to withdraw your money sooner, there is a 10% penalty on top of the taxes that are due. Since the earnings are considered ordinary income, your money will be taxed at the applicable rate.

You also can’t keep your money in the account indefinitely to avoid taxation. After the age of 70½, you have to start taking payments from the account.

The amount you put towards your 401K plan should depend on your circumstances and future needs. Though it is recommended to max out your contributions, you should add what you are comfortable with.

You may find that it is difficult to make substantial contributions at certain times in life. When you start your first job, buy your first home a home, or send your kids to college, it can help to roll back your contributions temporarily.

If you have profit sharing, it’s best to deposit enough to get a full employer match. Otherwise, you are passing up on money your boss wants to give you for your retirement.

As an example, let say your employer provides 50% matching contributions up to 10% of your income. If you make $80,000 and contribute $12,000 a year, your employer would add $6,000 to your savings. Since they match up to 10% of your income, you should deposit an extra $4000 to get the full $8,000 from your profit sharing.

Your employer is the only person that is authorized to set up your 401K account. They are also the only ones allowed to transfer money into the plan. When you opt-in for a 401k, your employer will ask you to fill out a salary reduction agreement.

With this form, you can specify what percentage of your annual income should be deposited into the account each month. Once you agree to an amount, the deduction should be listed on each of your paychecks. If needed, you can modify your contributions at any time by speaking with your employer.

If your new employer offers 401K, you can transfer the funds over. If they don’t have a 401K program, you still have some options.

One option is to freeze the account and leave it where it is, as long as rules permit. The funds would continue to grow with your investments, but no new deposits can be made.

Alternatively, you can move the funds to an IRA custodian. This is a good option if you are investment-savvy, but your contributions would be more limited.

If neither choices appeal, your final option is to cash out. However, penalties would apply if you take your money before the account or account holder reach maturity. To learn more about your options when leaving a job, click here to use our 401k Spend it or Save It Calculator.

The calculator is very straightforward to use. It just requires some basic information regarding your 401k savings program. Let’s review the questionnaire together.

Step 1. The first few questions relate to you and your 401K program. On the first line of the calculator, add the percentage of your salary to contribute. You can use the arrow keys or your keyboard to make this selection easier.

Step 2. Include your annual salary on the second line, followed by any yearly salary increases you are expecting. If you are unsure, it’s best to leave the salary increases blank. If your finances change, you can make additional calculations.

Step 3. Next, document your current age and age of retirement. Most individuals retire around 66.

Step 4. If you have any money currently in the account, add it to line 6. Then, specify the rate of return on your investments.

Step 5. The next two questions are regarding profit sharing. If your employer provides matching contributions, write down how much they will match. This variable should be a percentage of the deposits you are making.

Step 6. Finally, add the maximum match your employer will offer. This figure is expressed as a percentage of your annual salary.

From there, you can proceed to your results. There is a smart summary of the details you provided in the result window. You should also find a prompt of how much your savings may be worth at retirement.

For more information, please view the integrated reports.

The first report is a comparison of your account balance with and without profit sharing. The second tab is an itemized summary of your account balance each year.

Remember to bookmark this calculator and save it to the home screen of your smartphone. You can return as your contributions or employment changes. If you found this page useful, please promote us on social media by using the share feature. If you want to share your results, you can export a report via email to loved one or trusted advisor.