Estimated Taxable Income at Retirement (from 401k): —
Estimated Taxes Paid on 401(k) Withdrawals: —
Understanding 401(k) vs. Roth IRA
Choosing between a traditional 401(k) and a Roth IRA, or even utilizing both, involves strategic tax planning. This calculator helps you visualize the potential growth of your investments under different tax scenarios.
How the Calculator Works:
Traditional 401(k): Contributions are typically made pre-tax, lowering your current taxable income. Your investments grow tax-deferred, meaning you don't pay taxes on gains until you withdraw money in retirement. Withdrawals in retirement are taxed as ordinary income.
Roth IRA: Contributions are made with after-tax dollars, meaning no upfront tax deduction. Your investments grow tax-free, and qualified withdrawals in retirement are also tax-free.
Key Inputs and Assumptions:
Current Age & Retirement Age: Determines the investment horizon.
Current Balances & Annual Contributions: Your starting point and ongoing savings.
Assumed Annual Rate of Return: A crucial factor for long-term growth. This is a projection and actual returns may vary.
Current & Expected Tax Rates: The core of the comparison. If you expect to be in a higher tax bracket in retirement, Roth may be more advantageous. If you expect to be in a lower bracket, traditional 401(k) might be better.
The Math Behind the Estimates:
The calculator uses compound interest formulas to project future values. For the 401(k), it estimates the future value and then calculates potential taxes based on the expected retirement tax rate. For the Roth IRA, it projects the future value assuming tax-free growth and withdrawals.
Future Value Formula (simplified for annual compounding):
FV = PV * (1 + r)^n + P * [((1 + r)^n - 1) / r]
FV = Future Value
PV = Present Value (Current Balance)
r = Annual Rate of Return (as a decimal)
n = Number of Years to Retirement (Retirement Age – Current Age)
P = Annual Contribution
For the 401(k), the estimated taxes paid are calculated as: Estimated 401(k) Balance * (Expected Tax Rate at Retirement / 100). The calculator displays the gross 401(k) balance before taxes.
Use Cases:
This calculator is useful for:
Estimating the potential future value of your retirement savings in both account types.
Comparing the tax implications of traditional vs. Roth contributions.
Making informed decisions about where to prioritize your retirement savings based on your current and projected future tax situation.
Understanding the long-term impact of compound growth and consistent contributions.
Disclaimer: This calculator provides estimations based on your inputs and assumptions. It is not financial advice. Consult with a qualified financial advisor for personalized guidance.
function calculateRetirementGrowth() {
var currentAge = parseInt(document.getElementById("currentAge").value);
var retirementAge = parseInt(document.getElementById("retirementAge").value);
var current401kBalance = parseFloat(document.getElementById("current401kBalance").value);
var annual401kContribution = parseFloat(document.getElementById("annual401kContribution").value);
var annualRothIraContribution = parseFloat(document.getElementById("annualRothIraContribution").value);
var annualReturnRate = parseFloat(document.getElementById("annualReturnRate").value) / 100;
var taxRate = parseFloat(document.getElementById("taxRate").value) / 100;
var taxRateAtRetirement = parseFloat(document.getElementById("taxRateAtRetirement").value) / 100;
var yearsToRetirement = retirementAge – currentAge;
// Validate inputs
if (isNaN(currentAge) || currentAge < 18 || isNaN(retirementAge) || retirementAge <= currentAge ||
isNaN(current401kBalance) || current401kBalance < 0 ||
isNaN(annual401kContribution) || annual401kContribution < 0 ||
isNaN(annualRothIraContribution) || annualRothIraContribution < 0 ||
isNaN(annualReturnRate) || annualReturnRate < 0 ||
isNaN(taxRate) || taxRate 1 ||
isNaN(taxRateAtRetirement) || taxRateAtRetirement 1) {
document.getElementById("estimated401k").innerHTML = "Invalid Input";
document.getElementById("estimatedRothIRA").innerHTML = "Invalid Input";
document.getElementById("estimatedTaxableIncome").innerHTML = "Invalid Input";
document.getElementById("estimatedTaxesPaid").innerHTML = "Invalid Input";
return;
}
// — Calculate 401(k) Growth —
var futureValue401k = current401kBalance;
var futureValue401kContributions = 0;
if (yearsToRetirement > 0) {
// Compound current balance
futureValue401k = current401kBalance * Math.pow(1 + annualReturnRate, yearsToRetirement);
// Compound annual contributions
if (annual401kContribution > 0 && annualReturnRate > 0) {
futureValue401kContributions = annual401kContribution * (Math.pow(1 + annualReturnRate, yearsToRetirement) – 1) / annualReturnRate;
} else if (annual401kContribution > 0 && annualReturnRate === 0) {
futureValue401kContributions = annual401kContribution * yearsToRetirement;
}
}
var totalEstimated401k = futureValue401k + futureValue401kContributions;
var estimatedTaxesPaid = totalEstimated401k * taxRateAtRetirement;
var estimatedTaxableIncome = totalEstimated401k; // This is the gross amount before tax
// — Calculate Roth IRA Growth —
var futureValueRothIRA = 0;
var futureValueRothIRAContributions = 0;
// Roth IRA growth calculations are similar, but the contribution amount might be limited by IRS limits.
// For simplicity here, we use the provided annual Roth IRA contribution.
// In a real-world scenario, you'd also factor in IRS contribution limits.
var currentRothIraBalance = 0; // Assuming starting from zero for a separate Roth IRA calculation for clarity, or one could add current Roth balance if provided.
if (yearsToRetirement > 0) {
// Compound current balance (if any was provided)
futureValueRothIRA = currentRothIraBalance * Math.pow(1 + annualReturnRate, yearsToRetirement);
// Compound annual contributions
if (annualRothIraContribution > 0 && annualReturnRate > 0) {
futureValueRothIRAContributions = annualRothIraContribution * (Math.pow(1 + annualReturnRate, yearsToRetirement) – 1) / annualReturnRate;
} else if (annualRothIraContribution > 0 && annualReturnRate === 0) {
futureValueRothIRAContributions = annualRothIraContribution * yearsToRetirement;
}
}
var totalEstimatedRothIRA = futureValueRothIRA + futureValueRothIRAContributions;
// Display results
document.getElementById("estimated401k").innerHTML = "$" + totalEstimated401k.toLocaleString(undefined, { minimumFractionDigits: 0, maximumFractionDigits: 0 });
document.getElementById("estimatedRothIRA").innerHTML = "$" + totalEstimatedRothIRA.toLocaleString(undefined, { minimumFractionDigits: 0, maximumFractionDigits: 0 });
document.getElementById("estimatedTaxableIncome").innerHTML = "$" + estimatedTaxableIncome.toLocaleString(undefined, { minimumFractionDigits: 0, maximumFractionDigits: 0 });
document.getElementById("estimatedTaxesPaid").innerHTML = "$" + estimatedTaxesPaid.toLocaleString(undefined, { minimumFractionDigits: 0, maximumFractionDigits: 0 });
}