# 401(k) American Retirement Calculator

## How 401(k) Calculator works

**Annual salary :**

This is your annual salary from your employer, before taxes and other benefit deductions.

**Annual salary increase :**

The annual percentage you expect your salary to increase.

**Annual rate of return :**

The annual rate of return for your 401(k) account.

**Current age :**

Your current age.

**Age at retirement :**

Age at which you plan to retire.

**Current 401(k) Balance :**

The starting balance or current amount you have invested or saved in your 401(k).

**Contribution to 401k (%) :**

This is the percentage of your annual salary you contribute to your 401(k) plan each year.

**Employer Match (%) :**

The percentage of your annual 401(k) contributions your employer will match.

**Employer Max Contribution (%) :**

This is the maximum percent of your salary matched by your employer, regardless of the amount you decide to contribute.

## What is a 401(k) Plan

A 401(k) is a form of retirement savings plan in the U.S. with tax benefits that are mainly available through an employer. It is named after subsection 401(k) in the Internal Revenue Code, which was made possible by the Revenue Act of 1978. Self-directed 401(k)s exist for people who can't participate in employer-sponsored 401(k)s. Contributions to a 401(k) are made as pre-tax deductions during payroll and the resulting dividends, interest, and capital gains, all benefit from tax deferment.

**Key Points :**

A 401(k) plan is a company-sponsored retirement account that employees can contribute to. Employers may also make matching contributions.

There are two basic types of 401(k)s - traditional and Roth - which differ primarily in how they are taxed.

In a traditional 401(k), employee contributions reduce their income taxes for the year they are made, but their withdrawals are taxed. With a Roth, employees make contributions with post-tax income, but can make withdrawals tax-free.

## Formula to calculate 401(k)

This 401(k) calculator used the following formula:

**Total Account Value = CB × (1 + rate/100/12) ^{(n×12)} + (YC + EC) × ((1 + rate/100/12)^(n×12) - 1) / (rate/100/12) × (1 + rate/100/12)**

Where,

CB - Current 401k Balance

rate - Annual Rate of Return

n - Age at Retirement - Current Age

YC - Monthly 401(k) Contribution

EC - Employer Monthly 401(k) Adding

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