This 401k calculator can be used for estimating your 401k balance when you retire and the distributions after retirement depending on your income, age, contribution percentage, investment return and salary increase. The 401k calculator can be used effectively by the US residents.
It is a plan for retirement savings that falls in the pension category known as Defined Contribution Plans. Unlike Defined Benefit Plan, the direct counterpart of DCP, the account holders in DCP are allowed to select their investment option from amongst various alternatives available. The employees can contribute a specific maximum percentage of the pre-tax salaries they earn into the 401k plans on monthly basis. The employers, however, have the right to determine limits for the monthly contributions their employees can make. Besides, there are annual limits placed by IRS on employee contributions and there is an increase in these limits depending on general living costs that increase with inflation.
The contributions as well as the subsequent earnings in the form of interest that you get with 401k retirement plans can’t be withdrawn before 59 ½ years of age without penalty. However, there are some exceptions to this rule. These include:
1- If account holder dies and account gets paid to the beneficiary
2- If account holder has some qualifying disability
3- If account holder withdraws amounts below allowable deductions for medical expense
4- If account holder terminates employment at the age of 55 years at least
5- If account holder starts making substantial periodic payments
The amounts that are withdrawn from any of these scenarios will still be subjected to the regular income taxes. However, there won't be that 10% penalty for early withdrawal.
There is quite a hefty price associated with early withdrawals. So, account holders must act cautiously before they decide to make an early withdrawal. For the desperate situations, however, the account holders can go for a withdrawal from their 401k retirement fund regardless of any taxes and penalties. Urgent debt obligations and medical emergencies can be considered as legit reasons for making early withdrawals.
Nevertheless, one you should consider all the available options for paying for such expenses before they opt for liquidating their 401k account.
This 401k calculator requires you to provide details like your age, expected age of retirement, life expectancy, annual salary/income, expected yearly increase in the salary/income, current balance in the 401k fund, contribution amount including the employer match (it is a percentage of your salary/income), expected annual return, and the expected annual rate of inflation. Now, as you hit the calculate button, the 401k calculator will tell you what your 401k balance will be at your expected retirement age and its equivalent amount in buying power as of now. Besides, the calculator tells you how much you will be able to withdraw from the balance on monthly basis after your retirement. The equivalent amount in buying power at the age of retirement as well as 20 years after that is also displayed. The same information is also shown for annual withdrawals as well. In the end, the 401k calculator gives you the value for total contributions amount, total interest and the total payouts. There is also a tabular representation of how much your yearly contribution will be until you retire. The interest and yearly end balance is also shown in the table. And, after your retirement age, the payout starts which you can receive until there is enough balance left in your account. So, use this 401k calculator in order to find out all the information relevant to your 401k retirement plan and the associated account. It will surely help you to retire better.