401(k) Retirement Calculator
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Total 401(k) Balance: $0
Retirement calculator 401k key points
A 401(k) Retirement Calculator is a helpful tool for getting ready for retirement. It lets you figure out how much money you can save, taking into account when you plan to retire, the total amount you contribute, your employer’s contributions, and the rate of return on your investments.
Retirement key points
401(k):
- Definition: A retirement savings plan offered by companies, the 401(k) allows employees to save for retirement by deducting contributions from each paycheck.
- Investment Options: Enables investment in mutual funds and index funds, providing opportunities for the growth of savings over time.
- Variations: Non-profit or government employees may have a 403(b) or 457(b), which function similarly to 401(k)s, offering nearly identical benefits.
- Contribution Limits:
Maximum Contribution for Growth:
- In 2023, individuals can contribute up to $20,500 to their 401(k) accounts, or $27,000 if aged 50 or older.
- Additional Savings: To save more for retirement, individuals can consider opening an Individual Retirement Account (IRA), providing an extra $6,000 in tax-advantaged contributions, or $7,000 if aged 50 or older.
Tax-Advantaged Retirement Accounts:
- Definition: Retirement plans, including workplace 401(k)s, are tax-advantaged accounts, offering special tax treatment for contributions.
- Benefits: Contributions enjoy tax deferral or exemption, enhancing the growth of the balance compared to taxable investment accounts.
- Examples: Traditional and Roth 401(k)s fall under this category, providing tax advantages for retirement savings.
Compound Returns:
- Concept: Compound returns result from reinvesting investment returns, leading to exponential growth in the retirement nest egg.
- Example: If an initial investment of $1,000 earns a 10% annual return, the balance grows by $100 to $1,100 in the first year. Over time, this compounding effect can significantly boost retirement savings.
Retirement Age:
- Flexibility: Individuals can choose their retirement age based on their financial preparedness.
- Social Security: The official age to claim Social Security benefits from the federal government is 62.
- 401(k) Withdrawals: At 59 ½, individuals can start making withdrawals from their 401(k) without incurring IRS penalties, offering flexibility in accessing retirement funds.
Guide to 401(k) Contribution Limits and Employer Match for 2024