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403(b) Savings Calculator
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403(b) plans are only available for employees of certain non-profit tax-exempt organizations:
501c(3) Corps, including colleges, universities, schools, hospitals, etc. If you
are an employee of one of these organizations, a 403(b) can be one of your best
tools for creating a secure retirement. It provides you with two important advantages.
First, all contributions and earnings to your 403(b) are tax deferred. You only
pay taxes on contributions and earnings when the money is withdrawn. Second, many
employers provide matching contributions to your 403(b) account which can range
from 0% to 100% of your contributions. The combined result is a retirement savings
plan you cannot afford to pass up.
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Definitions
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Amount to contributeThis is the amount that you contribute to your 403(b)
plan each year. Participants can contribute up to 100% of their annual income, subject
to an annual maximum.
Annual salaryThis is your annual salary from your employer before taxes
and other benefit deductions. Since your contribution and any company match are
based on the salary paid to you by your employer, do not include any income you
may receive from sources other than your employer.
Current ageYour current age.
Age of retirementAge you wish to retire. This calculator assumes that
the year you retire, you do not make any contributions to your 403(b). So if you
retire at age 65, your last contribution happened when you were actually 64.
Current balanceThe starting balance or current amount you have invested
or saved in your 403(b).
Annual rate of returnThe annual rate of return for your 403(b) account.
This calculator assumes that your return is compounded annually and your deposits
are made monthly. The actual rate of return is largely dependent on the type of
investments you select. From January 1970 to December 2008, the average annual compounded
rate of return for the S&P 500, including reinvestment of dividends, was approximately
9.7% (source: www.standardandpoors.com). During this period, the highest 12-month
return was 61%, from June 1982 through June 1933. The lowest 12-month return was
-39%, which happened twice, once from September 1973 to September 1974 and again
from November 2007 to November 2008. Savings accounts at a bank may pay as little
as 1% or less but carry significantly lower risk of loss of principal balances.
It is important to remember 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.
Annual salary increaseThe annual rate you expect your salary to increase.
We assume that your salary will continue to increase at this rate until you retire.
Annual Investment FeeThis is an annual fee based on the balance of the
account.
Employer matchAn employer match is in addition to your annual contributions.
It is based on a percentage of your annual contributions. This range can be anywhere
from 0% to 100%. An employer match is usually only for a limited portion of your
salary. Please read the definition for "Employer maximum" for a detailed description.
Employer maximumThis 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 has a 50% match, up to a maximum of 6% of your annual salary.
If you have an annual salary of $25,000 and contribute 6%, your annual contribution
is $1500. With a 50% match, your employer will add another $750 to your 403(b) account.
If you increase your contribution to 10%, your annual contribution is $2500 per
year. Your employer match, however, is limited to the first 6% of your salary and
remains at $750.
Annual contribution limitsYour total contribution for one year is based
on your annual salary times the percent you contribute. However, your annual contribution
is also subject to certain maximum total contributions per year. The annual maximum
for 2009 is $16,500. If you are age 50 or over, a "catch-up" provision allows you
to contribute an additional $5,500 into your 403(b) account. It is also important
to note that employer contributions do not affect an employee's maximum annual contribution
limit.
In addition, an additional catch-up provision for participants that did not participate
in the plan earlier in their tenure may be available. These special catch-up provisions
are subject to length of employment and other contribution rules. Determining your
maximum contribution based on these additional catch-up provisions is beyond the
scope of this calculator.
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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 can not 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.
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