Alert
Close

Top the Trizzle leaderboard by 5 p.m. Friday to win a $100 gift card! Learn more

Highlights

Open

Rock Your Finances $50K Give Away Sweepstakes
AARP-iPad-ePub-app
Car buying made easy with the AARP Auto Buying Program

Jobs You Might Like

Most POPULAR

Viewed

Work
PROGRAMS

Best Employers for Workers Over 50

See the latest winners of this AARP recognition program.

Employer Resource Center

Attract and retain top talent in a changing workforce.

Roth 401(k) vs. Traditional 401(k) Calculator

Traditional IRA Calculator

Contributing to a traditional IRA can create a current tax deduction, plus it provides for tax-deferred growth. While long term savings in a Roth IRA may produce better after-tax returns, a Traditional IRA may be an excellent alternative if you qualify for the tax deduction.


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.

calculator
definitions

Current age

Your current age.

Annual contribution

The amount you will contribute to a 401(k) each year. This calculator assumes that you make 12 equal contributions throughout the year at the beginning of each month. The annual maximum for 2010 remains at $16,500. If you are age 50 or over, a "catch-up" provision allows you to contribute even more to your 401(k). In 2010, employees age 50 or over can deposit an additional $5,500 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.


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. If you expect your salary to be $110,000 or more in 2010 or was $110,000 or more in 2009, you may need to contact your employer to see if these additional contribution limits apply to you.

Expected rate of return

The annual rate of return for your 401(k) 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. For example, from December 1999 to December 2009, the average annual compounded rate of return for the S&P 500 was -0.6%, including reinvestment of dividends. From January 1970 to December 2009, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.1% (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 1% 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.

Age of retirement

Age you wish to retire. This calculator assumes that the year you retire, you do not make any contributions to your 401(k). So if you retire at age 65, your last contribution happened when you were actually 64.

Current tax rate

The current marginal income tax rate you expect to pay on your taxable investments. Use the table below to assist you in determining your current tax rate.

 

Filing Status and Income Tax Rates 2010

Caution: Do not use these tax rate schedules to figure 2009 taxes. Use only to figure 2010 estimates.

Tax rate Married filing jointly
or Qualified Widow(er)
Single Head of household Married filing separately
10% $0 - 16,750 $0 - 8,375 $0 - $11,950 $0 - 8,375
15% $16,751- 68,000 $8,376- 34,000 $11,951- 45,550 $8,376- 34,000
25% $68,001- 137,300 $34,001- 82,400 $45,551- 117,650 $34,001- 68,650
28% $137,301- 209,250 $82,401- 171,850 $117,651- 190,550 $68,651- 104,625
33% $209,251- 373,650 $171,851- 373,650 $190,551- 373,650 $104,626- 186,825
35% over $373,650 over $373,650 over $373,650 over $186,825


Source: http://www.irs.gov/pub/irs-drop/rp-09-50.pdf

Retirement tax rate

The marginal tax rate you expect to pay on your investments at retirement.

After tax total at retirement

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-deductible contributions and 2) what you would have earned if you had invested (in an ordinary taxable account) any income tax savings.

Jobs You Might Like

Discounts & Benefits

From companies that meet the high standards of service and quality set by AARP.

UPS

Members get 15% off eligible products/services and 5% off shipping at The UPS Store®.

AARP Discounts on Consumer Cellular Phones and Plans

Members save 5% on monthly service and usage charges with Consumer Cellular.

Member Benefits

Renew today! Members receive exclusive member benefits & affect social change.

Explore Your Learning Possiblities