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401(k) Spend It or Save It Calculator
There are several ways to manage your 401(k) balance when you leave an employer. The most fundamental of which is should you spend it or save it? Depending on your age and tax bracket, making the wrong decision can cost you thousands of dollars both in taxes and lost earnings. This calculator helps illustrate the difference.
*You may have one or more of the following options available for saving your money: rolling it into an IRA, moving it into your new employer's plan, or leaving it with your old employer. You should keep in mind that this amount represents pre-tax funds held within the retirement plan. Distributions are subject to income tax (distributions prior to age 59 1/2 may also be subject to a 10% additional tax penalty).
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Definitions
- Current age
- Your current age.
- Age of retirement
- Age you wish to retire. We calculate the ending balance at retirement for each of your rollover options.
- Federal income tax rate
- Consult the table below to determine your federal tax bracket. If you are unsure, the calculator will choose 25%. Please note that state taxes are entered in a separate entry field.
| 10% |
$0 - 16,050 |
$0 - 8,025 |
$0 - $11,450 |
$0 - 8,025 |
| 15% |
$16,051- 65,100 |
$8,026- 32,550 |
$11,451- 43,650 |
$8,026- 32,550 |
| 25% |
$65,101- 131,450 |
$32,551- 78,850 |
$43,651- 112,650 |
$32,551- 65,725 |
| 28% |
$131,451- 200,300 |
$78,851- 164,550 |
$112,651- 182,400
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$65,726- 100,150 |
| 33% |
$200,301- 357,700 |
$164,551- 357,700 |
$182,401- 357,700 |
$100,151- 178,850 |
| 35% |
over $357,700 |
over $357,700 |
over $357,700 |
over $178,850 |
Source: http://www.irs.gov/pub/irs-drop/rp-07-66.pdf
- State income tax rate
- The current State marginal tax rate you expect to pay on any additional income (or taxable distributions).
- 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. The actual rate of return is largely dependent on the type of investments you select. From January 1970 to December 2007, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 11.4% 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 may 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 generally 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 sales charges and other fees that funds and/or investment companies may charge.
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Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We can not and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
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