401(k) Retirement Calculator
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Understanding Your 401(k) Retirement Outlook
A 401(k) is a powerful retirement savings tool offered by many employers. It allows you to contribute a portion of your salary pre-tax, lowering your current taxable income, and allows those investments to grow tax-deferred until withdrawal in retirement. Employer matches, where your employer contributes a certain amount based on your contributions, act as "free money" and significantly boost your savings potential.
This calculator helps you project the future value of your 401(k) based on your current savings, your ongoing contributions, your age, your desired retirement age, and an assumed annual rate of return. Understanding these projections can empower you to make informed decisions about your savings strategy.
How the Calculation Works
The projection uses a compound interest formula, adjusted for annual contributions and the time horizon until retirement. The core of the calculation involves determining the future value of your current balance and the future value of your series of annual contributions separately, and then summing them.
- Years to Retirement: Calculated as
Desired Retirement Age - Current Age.
- Future Value of Current Balance: This uses the compound interest formula:
FV = PV * (1 + r)^n, where:
FV is the Future ValuePV is the Present Value (Current 401(k) Balance)r is the annual rate of return (as a decimal)n is the number of years until retirement
- Future Value of Annual Contributions: This uses the future value of an ordinary annuity formula:
FVA = P * [((1 + r)^n - 1) / r], where:
FVA is the Future Value of the AnnuityP is the periodic payment (Annual Contributions)r is the annual rate of return (as a decimal)n is the number of years until retirement
- Total Projected Nest Egg: The sum of the future value of the current balance and the future value of the annual contributions.
Example:
If you are 30 years old, wish to retire at 65 (so 35 years), have a current balance of $50,000, contribute $10,000 annually, and assume a 7% annual return:
- Years to Retirement (n) = 65 – 30 = 35 years
- Annual Rate of Return (r) = 7% or 0.07
- Future Value of Current Balance = $50,000 * (1 + 0.07)^35 ≈ $516,009
- Future Value of Annual Contributions = $10,000 * [((1 + 0.07)^35 – 1) / 0.07] ≈ $1,187,263
- Total Projected Nest Egg ≈ $516,009 + $1,187,263 ≈ $1,703,272
Disclaimer: This calculator provides an estimate. Actual investment returns can vary significantly, and are not guaranteed. Inflation is not factored into this calculation. It's recommended to consult with a qualified financial advisor for personalized retirement planning.
function calculateRetirement() {
var currentAge = parseFloat(document.getElementById("currentAge").value);
var retirementAge = parseFloat(document.getElementById("retirementAge").value);
var current401kBalance = parseFloat(document.getElementById("current401kBalance").value);
var annualContributions = parseFloat(document.getElementById("annualContributions").value);
var annualReturnRate = parseFloat(document.getElementById("annualReturnRate").value) / 100; // Convert percentage to decimal
var yearsToRetirement = retirementAge – currentAge;
// Validate inputs
if (isNaN(currentAge) || isNaN(retirementAge) || isNaN(current401kBalance) || isNaN(annualContributions) || isNaN(annualReturnRate)) {
document.getElementById("result").innerText = "Invalid input";
document.getElementById("yearsToRetirement").innerText = "";
return;
}
if (yearsToRetirement 0) {
futureValueContributions = annualContributions * (Math.pow((1 + annualReturnRate), yearsToRetirement) – 1) / annualReturnRate;
} else {
// If rate of return is 0, it's simply the sum of contributions
futureValueContributions = annualContributions * yearsToRetirement;
}
var totalNestEgg = futureValueCurrent + futureValueContributions;
// Format the result
var formattedNestEgg = totalNestEgg.toLocaleString('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0 });
var formattedYears = yearsToRetirement + " years until retirement";
document.getElementById("result").innerText = formattedNestEgg;
document.getElementById("yearsToRetirement").innerText = formattedYears;
}