403(b) Savings Calculator

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 You only pay taxes on contributions and earnings when the money is withdrawn.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

Amount to contribute

This 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 salary

This 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 age

Your current age.

Age of retirement

Age 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 balance

The starting balance or current amount you have invested or saved in your 403(b).

Annual rate of return

The 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 2009, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.1% per year. During this period, the highest 12-month return was 64%, and the lowest was -43% (Standard and Poor's, Dec. 2008). Savings accounts at a bank may pay as little as 1% or less (Federal Reserve Statistical Release, Dec. 2009). 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 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.

Annual salary increase

The 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 Fee

This is an annual fee based on the balance of the account.

Employer match

An 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 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 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 limits

Your 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 2010 remains at $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.