Calculator
LESSON CONTENTS
Annual salary
Annual salary is your total work salary for the entire year after income taxes. You should only include income related to the job that sponsors your 401(k) account. Don’t include any additional sources of income, such as freelance work or those not sponsored by your main employer.
The calculator won’t account for any possible raises you may receive in the future. You will likely earn more money for your time the longer you stay at the same corporation, so consider adjusting your annual income based on how much you plan to earn on average during the rest of your career.
Contribution percentage
Contributing percentage is a percentage of your annual income you want to contribute to your 401(k) plans each year. Most people actively saving for retirement contribute between 10 to 15 percent of their annual income. The 401(k) annual contribution limit for 2023 is $22,500 or $30,000 if you are age 50 or older.
Current age
This is how long you have been alive.
Retirement age
This is the age you plan to retire. The standard retirement age is 65 years old in the United States. You can start receiving Social Security benefits as early as age 62, but you won’t get the full benefits unless you wait to retire at age 67. The longer you keep working, the more you will have in savings for your golden years, but your health and job demands may be factors as well.
Current 401 (k) balance
This is how much you currently have saved in your 401(k) account. Log into your account to check the balance as of today’s date.
Annual rate of return
This is the annual interest percentage rate that applies to your 401(k) account. You can find this information by logging into your account. The calculator will assume that the percentage rate is compounded annually, which means all interest accrued is added to the principal balance every 12 months, so it also accrues interest. It also assumes that you are making monthly contributions to your retirement account.
The annual rate of return varies based on your investment portfolio, including your overall risk tolerance and market conditions. However, the average 401(k) annual rate of return ranges from five to eight percent when the portfolio consists of 60 percent stocks and 40 percent bonds. But the structure of your portfolio will change over time depending on how it is managed.
The calculator gives you a rough estimate of your future earnings, but it cannot account for unexpected events in the market, such as natural disasters, poor trades and disruptions to the economy.
Employer match
This is the percentage of your contribution that your employer will match. It ranges anywhere from 0 to 100 percent of your contributions.
Maximum employer contribution
This is the maximum percentage of your salary that your employer contributes regardless of how much you contribute. The limit is usually set to a certain percentage of your salary.
The maximum employer contribution supersedes the employer match rate. If the employer match rate exceeds the maximum employer contribution limit, the employer continues contributing up to the limit.
Next Steps
Use the results to understand how much savings you will have when you decide to retire. Compare the findings to your overall retirement budget based on your estimated cost of living, including essentials like food, healthcare, medication, transportation and housing as well as non-essentials like travel and eating out.
Don’t forget to include Social Security benefits when analyzing your retirement budget. Increase the contribution percentage until you reach the total limit to increase your retirement savings. This will also encourage your employer to contribute as much money as possible.
If you believe you will need more money for retirement than you are currently saving and are already making the maximum contribution, consider increasing your income by switching jobs or delaying retirement until you have sufficient savings. You can also open an IRA or Roth IRA to supplement your retirement savings. Try to save as much money as you can while you are still working to take full advantage of the tax benefits.
Be sure to look after your health in the years to come to ensure you can continue working. Consider adding disability insurance to protect your income if you can no longer earn a living because of an accident or disease. Schedule regular physicals to assess your ability to do the job, so you can enjoy the rest of your professional career.
Speak to a financial advisor to better understand how much you could earn between now and when you plan to retire. They can review your income and future earnings potential, current retirement savings plan and your plans for golden years to see if they are realistic. They can also advise you on how and where to invest your money based on the economy and market conditions.
Your earnings will also depend on what kind of 401(k) plan you have. A brokerage account will help you make the most money off your savings because someone will be actively managing the trades, but this will cost an additional fee or commission. Mutual funds typically come with lower risk and a lower annual rate of return.
You will need to adjust your portfolio based on interest rates and the overall health of the stock market. Many retirees will put more of their resources towards bonds the closer they get to retirement to insulate themselves from risk, but this may also reduce your future rate of return, especially if interest rates rise in the future due to inflation.
It's never too early to start preparing for retirement. Refer to this tool throughout your professional career to keep track of how much you are contributing year after year. Your needs and plans for retirement will change over time based on your financial situation, so continue to update your retirement savings plan based on the economy, your income and when you plan to retire.
As helpful as the Ent Retirement calculator can be, it is not the same as meeting with our Colorado financial advisors. It can only give you a rough estimate of how much you will earn in the future, whereas a financial advisor will give you tailored feedback and advice based on your unique situation. It’s all about making yourself comfortable when you are done working, so you can relax and enjoy what should be the best years of your life.