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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 You only pay taxes on contributions and earnings when the money is withdrawn.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 can not afford to pass up.
Definitions
- 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.
- Percent to contribute
- This is the percentage of your annual salary you contribute to your 403(b) plan each year. Participants can contribute up to 20% of their annual income, subject to an annual maximum.
- Annual contribution limits
- Your total contribution for one year 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 2002 is $11,000. This amount will increase gradually through 2006 to $15,000. If you are over 50, a new "catch-up" provision allows you to contribute even more to your 403(b). Starting in 2002 employees over 50 can deposit an additional $1,000 into their 403(b) account. Catch-up contribions level off at $5,000 per year in 2006. The table below lists the maximum contributions and catch-up contributions for each year through 2006.
Year | Employee Contribution limit | Additional "catch-up" contributions for workers 50+ |
2002 | $11,000 |
$1,000 |
2003 | $12,000
| $2,000 |
2004 | $13,000
| $3,000 |
2005 | $14,000
| $4,000 |
2006* and after | $15,000
| $5,000 |
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.
- 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 401(k). So if you retire at age 65, your last contribution happened when you were actually 64.
- Current 403(b) 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 dependant on the type of investments you select. For example, for the last thirty years the average annual rate of return for domestic equity stocks has been about 10%. Savings accounts at a bank pay as little as 2%.
- 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, lets 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.
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