401(k) Savings CalculatorA 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 You only pay taxes on contributions and earnings when the money is withdrawn.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 which can range from 0% to 100% of your contributions. The combined result is a retirement savings plan you can not afford to pass up.
Definitions
 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 2005 is $14,000. This amount will increase in 2006 to $15,000. If you are over 50, a new "catchup" provision allows you to contribute even more to your 401(k). In 2005, employees over 50 can deposit an additional $4,000 into their 401(k) account. It is also important to note that employer contributions do not affect an employee's maximum annual contribution limit. The table below lists the maximum contributions and catchup contributions for each year through 2006.
Year  Employee Contribution limit  Additional "catchup" contributions for workers 50+ 
2003  $12,000
 $2,000 
2004  $13,000
 $3,000 
2005  $14,000
 $4,000 
2006* and after  $15,000
 $5,000 
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 $95,000, 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. The actual rate of return is largely dependant on the type of investments you select. From January 1970 to December 2004, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 11.5% per year. During this period, the highest 12month return was 64%, 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 longterm investments. This includes the potential loss of principal on your investment.
 Annual salary increase
 The annual rate you expect your salary to increase. We assume that your salary will continue to increase at this rate until you retire.
 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.
 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.


