**Step 1**: Based on whether you chose to input traditional or Roth we determined the equivalent contribution of the other type that would have the same impact on take home pay. If this amount exceeds your contribution limit we assume those excess tax savings would be invested as after-tax contributions to the plan, an IRA or other tax-deferred vehicle.

**Step 2**: First we found the value of a Roth 401(k) if you contributed ANNUAL_ROTH_CONTRIBUTION per year for YEARS_UNTIL_RETIREMENT years earning an assumed RATE_OF_RETURN per year. This equaled TOTAL_ROTH. Since qualified distributions from a Roth 401(k) are not taxed, the total value remains TOTAL_ROTH.

**Step 3**:We then computed the totals for a Traditional 401(k). Again we determined the value of ANNUAL_TRADITIONAL_CONTRIBUTION per year for YEARS_UNTIL_RETIREMENT years earning an assumed RATE_OF_RETURN per year. This equaled V401K_TOTAL_BF_TAX. This is equal to higher than the Roth 401(k) total, TOTAL_ROTH. However, contributions and all earnings in a Traditional 401(k) are taxable when they are withdrawn. After taxes, the value of your Traditional 401(k) account would be V401K_TOTAL_AF_TAX.

**Step 4**: Finally, we need to account for possible differences in take home pay between the two options. This is for situations where the Traditional account contributions might exceed the 2016 annual 402(g) limit of $18,000 if your age is less than 50 and $24,000 if your age is greater than 50. The amount over the limit if invested in a non-tax-deferred account, at a rate of RATE_OF_RETURN for YEARS_UNTIL_RETIREMENT years, could be worth TOTAL_TAXABLE at retirement. This is after earnings are taxed. Based on your inputs there is no difference in take home pay, so this additional calculation is not required.

Traditional | Non-Tax-Deferred Account | Total Traditional & Non-Tax-Deferred Account | Roth | |

Total contributions until retirement age: A | TOTAL_TRADITIONAL_CONTRIBUTIONS | TOTAL_TAXABLE_CONTRIBUTIONS | TOTAL_BOTH_CONTRIBUTIONS | TOTAL_ROTH_CONTRIBUTIONS |

Current taxes: B | $0 | TOTAL_TAXABLE_CURRENTTAX | TOTAL_BOTH_CURRENTTAX | TOTAL_ROTH_CURRENTTAX |

Total contributions plus current taxes (A+B): C | TOTAL_TRADITIONAL_CONTRIBUTIONS | TOTAL_TAXABLE_COMBINED | TOTAL_BOTH_COMBINED | TOTAL_ROTH_COMBINED |

Hypothetical value at retirement age: D | V401K_TOTAL_BF_TAX | TOTAL_TAXABLE_BF_TAX | TOTAL_BOTH_BF_TAX | TOTAL_ROTH |

Taxes at retirement: E | - TOTAL_TRADITIONAL_RETIRETAX | - TOTAL_TAXABLE_RETIRETAX | - TOTAL_BOTH_RETIRETAX | - TOTAL_ROTH_RETIRETAX |

Hypothetical value at retirement after taxes (D-E): F | V401K_TOTAL_AF_TAX | TOTAL_TAXABLE | TOTAL_BOTH | TOTAL_ROTH |

Current age | CURRENT_AGE |

Current contribution type | CURRENT_CONTRIBUTION_TYPE |

Retirement age | AGE_OF_RETIREMENT |

Current annual contribution | ANNUAL_CONTRIBUTION |

Current tax bracket | CURRENT_TAX_RATE |

Hypothetical rate of return | RATE_OF_RETURN |

Retirement tax rate | RETIREMENT_TAX_RATE |

Current income | CURRENT_INCOME |

Pay frequency | PAY_LABEL |

- Current age
- Your current age.
- Age of retirement
- Age you wish to retire.
- Current tax rate
- The current marginal income tax rate you expect to pay on your taxable income. Use the table below to assist you in estimating your federal tax rate.
Filing Status and Income Tax Rates 2016* Tax Rate Married Filing Jointly or Qualified Widow(er) Single Head of Household Married Filing Separately 10% $0 - $18,550 $0 - $9,275 $0 - $13,250 $0 - $9,275 15% $18,550 - $75,300 $9,275 - $37,650 $13,250 - $50,400 $9,275 - $37,650 25% $75,300 - $151,900 $37,650 - $91,150 $50,400 - $130,150 $37,650 - $75,950 28% $151,900 - $231,450 $91,150 - $190,150 $130,150 - $210,800 $75,950 - $115,725 33% $231,450 -$413,350 $190,150 - $413,350 $210,800 - $413,350 $115,725 - $206,675 35% $413,350 -$466,950 $413,350 - $415,050 $413,350 - $441,000 $206,675 - $233,475 39.6% Over$466,950 Over$415,050 Over$441,000 Over$233,475 *Caution: Do not use these tax rate schedules to figure 2015 taxes. Use only to figure 2016 estimates. Source: 2015 Rev. Proc. 2015-61 - Retirement tax rate
- The marginal federal income tax rate you expect to pay on your retirement account distributions. Keep in mind that the calculator does not factor in other taxes such as state taxes, which could affect the comparison.
- Hypothetical rate of return
- The hypothetical annual effective rate of return for your 401(k) account. This calculator assumes that your deposits are made at the beginning of each pay period. For annual pay frequencies, it assumes the contributions are made at the beginning of the year. The actual rate of return is largely dependent on the type of investments you select.
It is important to remember that future rates of return can't be predicted and that investments that have a higher return potential are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time. This includes the potential loss of principal on your investment.

- Current income
- This is your current annual income.
- Annual contribution
The amount you expect to contribute to a 401(k) each year. This calculator assumes that new contributions to your account are made until you reach your retirement age. If you are currently age 29 and expect to retire at age 65, your first new contribution will happen at age 30 and continue until through age 65.

The annual maximum for 2016 is $18,000 (the 402(g) limit). If you are age 50 or over, a 'catch-up' provision allows you to contribute even more to your 401(k). Employees over 50 can deposit an additional $6,000 into their 401(k) account. It is also important to note that employer contributions do not affect an employee's maximum annual contribution limit. Both the annual maximum and 'catch-up' provisions are indexed for inflation. Your plan may also impose limits on how much you can contribute.

It is important to note that some employees are subject to another form of contribution limits. Employees classified as 'Highly Compensated' may be subject to contribution limits based on their employer's overall 401(k) participation. You may need to contact your employer to see if these additional contribution limits apply to you.

- Current contribution type
- This is either Roth or Traditional. If you choose 'Roth' we will increase the assumed contribution to your 'Traditional' option to equal the same net take home pay. If you choose 'Traditional' we will decrease the assumed contribution to your 'Roth' option to equal the same net take home pay.
- Pay frequency
- How often you are paid. We use this entry to calculate the net impact on your paycheck.
- Qualified Distribution
- There are two requirements to take a qualified distribution from a Roth 401(k) account. At least 5 years must elapse from the initial contributions, and you must reach age 59 1/2, disability or death.
- Hypothetical Value at Retirement Age after Taxes, Traditional 401(k) and After-Tax Amount Invested
- For the Roth 401(k), this is the total value of the account. For the traditional 401(k), this is the sum of two parts: 1) The value of the account after you pay income taxes on all earnings and tax-deferred contributions and 2) The accumulated value of the income tax savings of any contributions that exceeded your 401(k) contribution limit, if any, if you invested them as after-tax contributions to a tax-deferred vehicle. For these earnings, distributions are taxed at the same tax rate you indicate in the Retirement tax rate.

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