How This Simple 457(b) Calculator Works
Our 457(b) Calculator offers a straightforward method to estimate the long-term growth of your retirement savings plan account by your desired retirement date.
Assessing your 457(b) plan's growth helps tailor your annual contributions to achieve your retirement goals.
Your 457(b) Calculator Inputs
To get started, we only require four fields:
- Current Annual Income: Your annual salary before taxes and benefit deductions.
- Years Until Retirement: The number of years until you intend to retire.
- Current Balance: The amount of money in your 457(b) account.
- Current Before-Tax Contribution: The pre-tax percentage of your salary you contribute annually to your 457(b) plan. You can select a percentage between 0 and 20%.
The Internal Revenue Service (IRS) contribution rules set 457(b) annual contribution limits. Read our 457(b) Guide for specifics on annual and catch-up contributions.
Advanced Inputs
Expanding the Advanced menu lets you input more details for a precise estimate, personalizing your results.
- Annual Salary Increases: Your annual salary growth rate until retirement.
- Pay Period Frequency: How often do you receive a paycheck? Choose from the following options: Weekly (once a week), Bi-weekly (every two weeks), Semi-monthly (twice a month), Monthly (once a month), or Annual (once a year).
- Annual Before-Tax Return On Savings: The expected annual before-tax return on your 457(b) retirement account.
The plan administrator chooses the investment options and the institutions managing the funds for your 457(b) plan. They should be able to provide the historical average annual rate of return for your 457(b) plan over a specific period.
Your 457(b) investments carry risk, so past performance doesn't ensure future results. Your long-term investment return (including reinvestment of dividends) and principal balances of your investments may vary, meaning your shares could be worth more or less than their initial cost (loss of principal) upon redemption. - Employer Match: The percentage of your annual 457(b) contribution that your employer will match and add to your retirement account, up to a preset maximum. Note that employer matching is not a feature of all 457(b) plans, particularly some governmental plans.
- Maximum Employer Match: This is the annual maximum percentage of your salary that your employer sets as the limit for matching contributions to your 457(b) plan.
Understanding Your Results
Our Simple 457(b) calculator provides quick results about your Accumulated Plan Balance at Retirement, your Contributions (out-of-pocket costs), and your Employer Matching Contributions.
Steps to understand and act on the information:
1. Review Your Estimated Balance
- Understand the figure: The primary output is the estimated Plan Balance at Retirement, calculated based on your inputs.
- Assess adequacy: Compare this amount with your financial obligations to ensure it secures your retirement, supports your lifestyle, meets expenses, and covers the planned duration.
2. Examine Assumptions
- Check inputs: Reviewing data entry for accuracy is vital, as minor errors can greatly impact the estimated retirement amount.
3. Consider Different Scenarios
- Adjust variables: Adjust the calculator's input variables, like savings rates, to simulate scenarios and see their impact on your estimated plan balance.
- Plan for contingencies: Consider the effects of unforeseen events like severe illness with medical expenses, an economic downturn, or changes in social security.
4. Consult a Professional
- Seek advice: 457b calculators are a useful starting tool, but you should always consult a financial advisor for investment advice. Advisors can enhance your plan by considering detailed financial strategy, retirement tax implications, and personal circumstances.
- Review periodically: Consistently update your retirement plan to align with your goals, factoring in changes in your finances, interest rates, or market conditions.
5. Decision Making
- Prioritize needs: If the calculator's estimate and your research reveal a shortfall in retirement assets, consider increasing contributions or adjusting your investment strategy for higher returns.
Factors That Impact Your 457(b) Growth
Growing your 457(b) effectively relies on understanding key factors to make informed decisions about your retirement savings strategy. Here are the main factors that impact 457(b) growth:
Contribution Amount
- Employee Contributions: Regularly increasing your 457(b) contributions directly boosts account growth, potentially enhancing your retirement savings over time.
Investment Choices
- Asset Allocation: The composition of your selected investments affects growth potential and risk. A diversified portfolio manages risk and enhances returns.
- Fund Performance: Fund performance varies; choosing those with strong track records and low fees can boost growth.
Investment Fees
- Management Fees: Fund managers charge an annual investment fee to manage investments.
- Expense Ratios: Selecting mutual funds or ETFs with lower annual fees can increase your returns by preserving your growth.
Market Conditions
- Economic Cycles: Your 457 plan performance is affected by the overall economic climate, including times of growth or recession.
Time Horizon
- Compound Interest: Investing early allows your 457(b) to benefit from compound interest, potentially boosting growth over time.
- Age and Retirement Timeline: The years until retirement influence your investment strategy. Younger people can usually afford to take more risks for potentially higher returns.
Inflation Rate
- Purchasing Power: Investing in assets that outpace inflation is crucial to maintaining the purchasing power of your retirement savings.
Tax Implications
- Pre-Tax Contributions: Traditional 457(b) contributions are pre-tax, lowering your current taxable income, but are taxed when withdrawn.
- Roth 457(b): Contributions are made with after-tax dollars, but withdrawals are tax-free under certain conditions, benefiting those expecting a higher tax bracket in retirement.
Withdrawal Strategies
- Early Withdrawals: Unlike 401(k)s, funds from a governmental 457(b) plan can be withdrawn without a 10% early withdrawal penalty upon separation from service, regardless of age. These distributions are, however, still subject to ordinary income tax.
- Required Minimum Distributions (RMDs): Upon turning 73, you must take minimum distributions, affecting the growth of your remaining balance.
Behavioral Factors
- Consistency: Steady growth relies on regular and consistent contributions.
- Market Timing: Market timing can result in missed opportunities and losses; staying invested with a long-term strategy is usually more effective.
Loan Provisions
- 457(b) Loans: Certain plans permit loans from your 457(b), offering short-term liquidity but potentially harming long-term growth if not repaid promptly.
Learning these factors and their interactions helps enhance your 457(b) retirement savings growth and secures your financial future.
Benefits of Using a 457(b) Calculator
A 457(b) calculator is an invaluable tool for planning retirement savings due to its numerous benefits. Here are the key advantages:
Personalized Projections
- Future Balance Estimates: A 457(b) retirement calculator can project your retirement savings growth over time based on your contributions, employer matches, and investment returns.
- Retirement Income Estimates: It helps you estimate the monthly or annual income you can expect during retirement, giving you a clearer picture of your financial future.
Contribution Planning
- Optimal Contribution Rates: By adjusting your contribution rates in the calculator, you can find the optimal amount to save each month or year to reach your retirement goals. Take advantage of additional contribution limits.
- Impact of Increasing Contributions: See how increasing your contributions, even small amounts, can significantly boost your retirement savings.
Employer Matching Maximization
- Matching Contributions: Understand how much your employer's matching contributions can add to your retirement savings and ensure you take full advantage of this benefit.
Investment Strategy Assessment
- Rate of Return: Experiment with different rates of return to see how changes in investment performance might affect your savings.
- Risk Assessment: Assess how different levels of investment risk can impact your retirement savings and adjust your strategy accordingly.
Tax Implications
- Tax-Deferred Growth: Discover how a traditional 457(b)'s tax-deferred growth can boost retirement savings compared to taxable accounts.
- Roth 457(b) Analysis: Compare the benefits of a Roth 457(b), which offers tax-free withdrawals, to see which option might be better for your situation.
Inflation Impact
- Purchasing Power: Factor in inflation to understand how it will affect your savings and the purchasing power of your retirement income.
Scenario Analysis
- Different Scenarios: Run various scenarios, such as changes in salary, contribution rates, and retirement age, to see how other factors can influence your retirement savings.
- Market Volatility: Assess how market volatility might impact your savings and prepare for potential fluctuations in investment performance.
Savings Goals Setting
- Goal Achievement: Determine if your current savings strategy is adequate to meet your retirement goals or if adjustments are needed.
- Milestone Tracking: Set and track milestones to ensure you are on the right path to achieving your long-term financial objectives.
Retirement Age Planning
- Optimal Retirement Age: Experiment with different retirement ages to see how retiring earlier or later can affect your savings and retirement income.
Loan & Withdrawal Impact
- Loan Analysis: Comprehend how taking a loan from your 457(b) can impact your long-term savings and the importance of repaying it promptly.
- Early Withdrawals: Examine the tax impacts of early withdrawals and their potential to reduce your retirement savings.
Behavioral Insights
- Consistency and Discipline: Regular calculator use emphasizes the value of consistent savings and disciplined investing.
- Financial Awareness: Enhances understanding of how financial decisions impact your retirement prospects, enabling more informed and effective planning.
Sources
- IRC 457(b) deferred compensation plans - Internal Revenue Service (IRS). www.irs.gov/retirement-plans/irc-457b-deferred-compensation-plans
- 457(b) and 403(b) Plans - For Investors - U.S. Securities and Exchange Commission. www.investor.gov/additional-resources/retirement-toolkit/employer-sponsored-plans/403b-and-457b-plans
- Retirement Topics — Required Minimum Distributions (RMDs) - Internal Revenue Service (IRS). www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
