401(k) Contribution Effects on Your Paycheck Calculator
401(k) Contribution Effects on Your Paycheck Calculator Definitions
- Current 401(k) contribution
- This is the percentage of your annual salary you contribute to your 401(k) plan each year. While your plan may not have a deferral percentage limit, this calculator limits deferrals to 75% to account for FICA (Social Security and Medicare) taxes. This rule may not apply to all plans.
- New 401(k) contribution
- This is the new percentage of your annual salary you would like to compare your current 401(k) contributions to.
Your annual 401(k) contribution is subject to maximum limits established by the IRS. **PLAN_CONTRIBUTION_MAX** Employer contributions do not count toward the IRS annual contribution limit.
Employees classified as "Highly Compensated" may be subject to additional limits based on their employer's overall 401(k) participation. **PLAN_HIGHLY_COMPENSATED**
While your plan may not have a deferral percentage limit, this calculator limits deferrals to 75% to account for FICA (Social Security and Medicare) taxes. This rule may not apply to all plans.
- Gross pay
- This is your gross pay, before any deductions, for one pay period. Please enter a dollar amount from $1 to $1,000,000.
- Pay period
- This is how often you are paid. Your selections are:
- Weekly (52 paychecks per year)
- Every other week (26 paychecks per year)
- Twice a month (24 paychecks per year)
- Monthly (12 paychecks per year)
- Annually (1 paycheck per year).
- Filing status
- This is your income tax filing status. The choices are "Single", "Married" and "Head of Household." Choose "Married" if you are married, "Head of household" if you are unmarried with dependent children, "Single" if you file your taxes as a single person or if you are married but file separately.
- State and local taxes
- This is the percentage that will be deducted for state and local taxes. **TAX_STATE_ALLOWANCE_TJA_DEFINITION** Please note, this calculator can only estimate your state and local tax withholding. The tax rate displayed is an assumption that may or may not be relevant to your situation.
- Pre-tax deductions
- Enter any payroll deductions made by your employer that are made with pre-tax income. This might include your health insurance and/or life insurance, among other pre-tax deductions.
- Post-tax deductions
- Enter any payroll deductions made by your employer that are made with after-tax income.
- Post-tax reimbursements
- Enter any reimbursements made by your employer that are after-tax.
- Expected annual salary change
- The expected annual increase in your salary. We use this to project future contributions and matches to your savings plan.
- Year to date income
- Income from your employer that you have been paid during the current year, before the current payroll period. We use this amount to determine if you are still required to pay FICA OASDI for the current payroll period.
- Social Security tax
- **TAX_SOCIAL_SECURITY_MAX** Please note that if you have other wages or employers this calculator does not make any assumptions as to the total Social Security tax withheld for the current year other than the actual inputs for this calculator. This tax is also referred to as the Federal Insurance Contributions Act Old Age Survivors and Disability Insurance (FICA OASDI).
- Medicare tax
- Medicare tax is calculated as your gross earnings times 1.45%. Unlike the Social Security tax, there is no annual limit to the Medicare tax. Starting in 2013, an additional Medicare tax of 0.9% is withheld on all gross earnings paid in excess of $200,000 in a calendar year. If you enter an amount for the year-to-date gross earnings, this additional Medicare tax will be calculated based on the current period's gross earnings that exceed the annual $200,000 threshold. If no year-to-date amount is entered, any additional Medicare tax withholding will be calculated only for any gross earnings in excess of $200,000 for the current payroll period. If year-to-date wages prior to the current payroll period have exceeded $200,000, the year-to-date wages must be entered to calculate an accurate additional Medicare tax.
- Federal tax withholding calculations
- Plan type
- Choose the type of plan your employer sponsors. Choices include an option for pre-tax ("traditional" contributions) and after-tax ("Roth" contributions).
- Current balance
- The current balance of your retirement plan.
- Current age
- Your current age.
- Age at retirement
- Age at which you plan to retire. This calculator assumes that the year you retire, you do not make any contributions to your 401(k). For example, if you retire at age 65, your last contribution occurs when you are actually 64.
- Annual rate of return
- This is the annual rate of return you expect from your retirement account. The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31st 2020, had an annual compounded rate of return of 13.8%, including reinvestment of dividends. From January 1, 1971 to December 31st 2020, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.8% (source: www.spglobal.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 financial institution 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 investment funds and/or investment companies may charge.
- Employer match
- The percentage of your annual 401(k) contributions your employer will match. These contributions are often capped. Please read the definition for "Employer maximum" for more information. Also note employer contributions do not count toward the IRS annual contribution limit.
Matching contributions can also be subject to a vesting schedule. See your plan information for details.
- Employer maximum
- This is the maximum percent of your salary matched by your employer, regardless of the amount you decide to contribute.
For example, let's assume your employer provides a 50% 401(k) contribution match on up to 6% of your annual salary. If you have an annual salary of $100,000 and contribute 6%, your contribution will be $6,000 and your employer's 50% match will be $3,000 ($6,000 x 50%), for a total of $9,000. If you only contribute 3%, your contribution will be $3,000 and your employer's 50% match will be $1,500, for a total of $4,500.
If you increase your contribution to 10%, you will contribute $10,000. Your employer's 50% match is limited to the first 6% of your salary then limits your employer's contribution to $3,000 on a $100,000 salary. The total 401(k) contribution from you and your employer would therefore be $13,000.