How to Use a 401(k) Calculator to Maximize 2023 Retirement Savings 

Author: Siân Killingsworth / Reviewer: Callie Adams Farnsworth, QKA, CAFCA
9 Jan 2023 / 401(k) Plan Information, Personal Finance

It’s never too early to start planning for retirement. If you’re not sure how much money you need to save to retire comfortably, a 401(k) calculator can help you figure out how much money you need to put away every month.

With just a few clicks, this tool can estimate how long it will take for your retirement account to grow into something substantial—and can even recommend tactics that may help boost your savings rate through lifestyle changes like cutting down on spending or earning more income.

What is a 401(k) Calculator?

A 401(k) calculator is a tool that allows you to estimate how much money you’ll have in your retirement savings account based on the amount of money that you contribute, as well as other variables.

It’s important to note that the results from these calculators are only estimates and shouldn’t be relied upon as a guarantee of future returns or performance.

How to use a 401K Calculator

To use a 401K calculator, you need to know how much you have already saved and how much you are able to put away each month. Next, estimate how much money will be needed for your retirement and then see if you can afford to save as much as possible each month.

In addition to these basic steps, there are also other questions that should be asked when using a 401K calculator:

Retirement Questions

• How long do you plan on working?

The more time between now and retirement, the more time there is for compound interest (the process by which investments grow at an accelerating rate) to work in your favor.

• How long do you expect your retirement to last?

Many people wish to retire early, but with life expectancy increasing, it’s important to remember to account for additional years in which you will need funding.

• What kind of retirement plan do you have?

If your plan limits the amount you can contribute to retirement savings each year, such as with an IRA, you may want to ask your employer to switch to a 401(k) plan. A 401(k) plan allows participants to contribute three times as much each year toward retirement as an IRA.

• What are your retirement goals?

Write them down and make sure they include the lifestyle you want to live in retirement.

Financial Questions

• What kind of investment options does your plan offer?

Some plans offer several types of investments; others have fewer options, and some have none at all. If your plan offers a variety of investing instruments, so much the better. A good plan will feature stocks, bonds, ETFs, and more. Most plans will offer ready-to-go retirement plans that have been designed by an investment professional, and some will offer the option for you to choose your own investments.

• How much income will you need each month during retirement?

This will help determine how much money you’ll need to save in order to meet those goals.

• What are your current savings/investment accounts worth?

Also consider how much interest they earn, as well as any other assets that may be available to use toward reaching your goals.

• Don’t forget about updates to contribution limits.

The IRS updates the amount you’re permitted to contribute to your retirement annually. Make sure you know what the maximum is so you can save as much as possible.

It’s never too late to start planning for your future. Try the Ubiquity 401(k) retirement calculator now!

 

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.