- Current age
- Your current age.
- Annual contribution
- The amount you will contribute to a 401(k) or 403(b) each year. This calculator assumes that you make 12 equal contributions throughout the year at the beginning of each month. The annual maximum for 2007 is $15,500. If you are over 50, a "catch-up" provision allows you to contribute even more to your 401(k) or 403(b). In 2007, employees over 50 can deposit an additional $5,000 into their 401(k) or 403(b) account. It is also important to note that employer contributions do not affect an employee's maximum annual contribution limit. Both the annual maximum and "catch-up" provisions are indexed for inflation after 2007.
It is important to note that some employees are subject to another form of contribution limits. Employees classified as "Highly Compensated" may be subject to contribution limits based on their employer's overall 401(k) or 403(b) participation. If your salary for the previous plan year was above $100,000, you may need to contact your employer to see if these additional contribution limits apply to you.
- Expected rate of return
- The annual rate of return for your 401(k) or 403(b) account. This calculator assumes that your return is compounded annually and your deposits are made monthly. The actual rate of return is largely dependant on the type of investments you select. From January 1970 to December 2006, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 11.5% 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 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 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 additional sales charges and fees that funds may charge.
- 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) or 403(b). So if you retire at age 65, your last contribution happened when you were actually 64.
- Current tax rate
- The current marginal income tax rate you expect to pay on your taxable investments. Use the table below to assist you in determining your current tax rate.
| Filing Status and Income Tax Rates 2007 |
Tax rate | Married filing jointly
or Qualified Widow(er) | Single | Head of household | Married filing separately |
| 10% |
$0 - 15,650 |
$0 - 7,825 |
$0 - $11,200 |
$0 - 7,825 |
| 15% |
$15,651- 63,700 |
$7,826- 31,850 |
$11,201- 42,650 |
$7,826- 31,850 |
| 25% |
$63,701- 128,500 |
$31,851- 77,100 |
$42,651- 110,100 |
$31,851- 64,250 |
| 28% |
$128,501- 195,850 |
$77,101- 160,850 |
$110,101- 178,350
|
$64,251- 97,925 |
| 33% |
$195,851- 349,700 |
$160,851- 349,700 |
$178,351- 349,700 |
$97,926- 174,850 |
| 35% |
over $349,700 |
over $349,700 |
over $349,700 |
over $174,850 |
Source: http://www.irs.gov/formspubs/article/0,,id=164272,00.html
- Note for ministers
1) Ministers do not pay Social Security taxes on contributions to a traditional 403(b) plan like a regular employee pays FICA tax. Roth Contributions are after tax, thus subject to SECA taxation for ministers. To get a better comparison of a traditional 403(b) and the Roth 403(b), a minister with earnings below the Social Security taxable wage base ($97,500 for 2007) may want to increase the current tax rate figure in the above illustration by approximately 15% to reflect the value of not paying Social Security tax on traditional 403(b) contributions.
2) Also, a minister must consider the fact that distributions from a traditional 403(b) plan from that are designated as a minister's housing allowance may have the benefit of being tax free in retirement.
- Retirement tax rate
- The marginal tax rate you expect to pay on your investments at retirement.
- After tax total at retirement
- For the Roth 401(k) or 403(b), this is the total value of the account. For the Traditional 401(k) or 403(b), this is the sum of two parts: 1) The value of the account after you pay income taxes on all earnings and tax-deductible contributions and 2) what you would have earned if you had invested (in an ordinary taxable account) any income tax savings.
- Note for ministers
1) Ministers do not pay Social Security taxes on contributions to a traditional 403(b) plan like a regular employee pays FICA tax. Roth Contributions are after tax, thus subject to SECA taxation for ministers. To get a better comparison of a traditional 403(b) and the Roth 403(b), a minister with earnings below the Social Security taxable wage base ($97,500 for 2007) may want to increase the current tax rate figure in the above illustration by approximately 15% to reflect the value of not paying Social Security tax on traditional 403(b) contributions.
2) Also, a minister must consider the fact that distributions from a traditional 403(b) plan from that are designated as a minister's housing allowance may have the benefit of being tax free in retirement.
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