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). You should consult your tax or legal advisor concerning your particular situation.
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.
|Filing Status and Income Tax Rates 2012
Caution: Do not use these tax rate schedules to figure 2011 taxes. Use only to figure 2012 estimates.
|Tax rate||Married filing jointly
or qualified widow(er)
|Single||Head of household||Married filing separately|
|10%||$0 – 17,400||$0 – 8,700||$0 – $12,400||$0 – 8,700|
|15%||$17,400 – 70,700||$8,700 – 35,350||$12,400 – 47,350||$8,700 – 35,350|
|25%||$70,700 – 142,700||$35,350 – 85,650||$47,350 – 122,300||$35,350 – 71,350|
|28%||$142,700 – 217,450||$85,650 – 178,650||$122,300 – 198,050||$71,350 – 108,725|
|33%||$217,450 – 388,350||$178,650 – 388,350||$198,050 – 388,350||$108,725 – 194,175|
|35%||over $388,350||over $388,350||over $388,350||over $194,175|
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. The S&P 500 for the ten years ending on December 31st, 2011 had an annual compounded rate of return of 2.92%, including reinvestment of dividends. From January 1970 through the end of 2011, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.01% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a bank may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and 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.
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 cannot 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.