This is an important distinction since you're comparing this balance to an otherwise tax-free Roth IRA balance. This figure indicates the after-tax value (at your expected tax rate in retirement) of your 401k. This is the projected inflation-adjusted value of your 401k when you retire. This value represents your tax-free savings in terms of today's dollars - meaning a million dollar nest egg will retain the equivalent purchasing power of a million dollars today. 401k calculator automatically updates this value when you fill in the aforementioned fields. This is the projected inflation-adjusted value of your Roth IRA when you retire. However, if you're currently in the 25% tax bracket but you expect to earn more in retirement or you think tax rates will climb over time, then you might put 30% or 35% in the "Expected Tax Rate in Retirement" field. While tax rates are subject to change over time, a good ballpark estimate will serve you well.įor example, if you're currently in the 25% tax bracket but you anticipate earning less in your retirement years, then you might put 15% in the "Expected Tax Rate in Retirement" field. This is the tax rate you anticipate in your retirement years. Make sure you put a realistic age in the "Retirement Age" field in order to get the most accurate calculation of your inflation-adjusted retirement savings. This is the age at which you'd like to retire, and while you'd probably like to make this the same as your current age, that may not be realistic. This is the income tax rate which currently applies to your income.įor instance, if you earn $60,000 per year, and you're currently in the 25% federal income tax bracket, put 25% in the "Current Tax Rate" field. Seriously, though, you might want to consider an older age for this field if you're not yet investing for retirement but plan to do so in the future. Just check your birth certificate if you're not sure! However, if you're more conservative, you might want to use a higher rate of inflation. The default rate is set at 4.1% - the approximate annual rate of inflation over the past seven decades. It's important that you don't underestimate the rate of inflation since it will eat away at the purchasing power of your savings over time. This is the annual rate of inflation you project for the timeframe in which your retirement savings is invested. If you expect a higher or lower rate of return, adjust accordingly. However, since most people invest their retirement savings in stocks, the default is set to 10.85% - the annual compound rate of return on the S&P 500 from 1959 to 2003. This will vary from person to person based investing strategy, fees, types of investments, and other factors. This is the annual compound rate of return you anticipate receiving on your retirement savings. If you're married, and both you and your spouse intend to make the maximum contribution, then input the appropriate amount in this field.įor example, if both you and your spouse are over age 50 and eligible to contribute the maximum amount, then put $12,000 in the "Annual Contribution" field. So if you're 50 or older and plan to make the maximum contribution, put $6,000 in the "Annual Contribution" field. However, the maximum contribution is $6,000 for people age 50 and older. The default for this field is set to $5,000 because that's the maximum contribution you can make to an IRA if you're under age 50. If so, then put $1,800 in the "Annual Contribution" field.
This is the amount you plan to contribute to either your Roth IRA or 401k on an annual basis.įor example, let's say you plan to contribute $150 per month. 401k Calculator Termsīelow is an explanation of each calculator term:
ROTH IRA CALCULATOR UPDATE
Then, as you fill in each field with numbers customized to your situation, the calculator will automatically update to reveal two projected inflation-adjusted values for your retirement savings - one if you invested your contributions in your Roth IRA and the other if you invested them in your 401k. Use the section below as a guide for your Roth IRA vs.
Not sure what these terms mean? Not sure what numbers to put in? 401k calculator featured above, using a value for each of the following items:
Simply fill out the fields in the Roth IRA vs.
ROTH IRA CALCULATOR HOW TO
Your-Roth-IRA.Com How To Use The Roth IRA vs.
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