A 457 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 457 are tax-deferred.
You only pay taxes on contributions and earnings when the money is withdrawn. Second, many
employers provide matching contributions to your 457 account which can range from 0 percent to
100 percent of your contributions. The combined result is a retirement savings plan you can not
afford to pass up. Click View Report to see your total results summary.
Definitions
Annual salary
This is your annual salary from your employer before taxes and other
benefit deductions. Since your contribution and 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 457
plan each year. This calculator limits your contribution to 50 percent of your
salary.
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 under the tax laws. The annual
maximum for 2007 is $15,500. If you are over 50, a "catch-up" provision allows
you to contribute an additional $5,000 into your 457 account. It is also
important to note that employer contributions do not affect an employee's
maximum annual contribution limit. Some 457 plans impose lower limits than
required by the tax laws.
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 457. So if you retire at age 65, your
last contribution happened when you were actually 64.
Current 457 balance
The starting balance or current amount you have invested or saved in your
457.
Annual rate of return
The annual rate of return for your 457 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 2006, the average compounded rate
of return for the S&P 500, including reinvestment of dividends, was
approximately 11.5 percent per year (source: www.standardandpoors.com).
During this period, the highest 12-month return was 61 percent, and the
lowest was -39 percent. Savings accounts at a bank pay as little as 1
percent or less.
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. It is not possible to invest directly in an index, and the
compounded rate of return noted above does not reflect additional sales
charges and fees that funds may charge.
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 percent to 100 percent.
This calculator assumes that the matching percentage is level up to the
employer maximum. You may need to use the average matching percentage if
your 457 plan uses more than one matching percentage.
For example, let's assume the employer matches 50 percent of the
employee's contributions up to 6 percent of their salary. The employee
earns $100,000 per year and contributes 10 percent. The results would
be:
$10,000 from the employee
$3,000 from the employer (which is 50 percent of $6,000 or 6
percent of the annual salary).
Total: $13,000
Please read the definition for "Employer maximum" for a detailed
description of maximum employer matching contributions. It is important to
note employer contributions do not affect the maximum annual deferral
allowed to an employee. (The employee contribution plus any employer match
cannot exceed the maximum allowed deferral.)
This calculator assumes that the matching percentage is level up to the
employer maximum. You may need to use the average matching percentage if
your 457 plan uses more than one matching percentage.
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 percent match, up to a maximum of 6 percent of your
annual salary. If you have an annual salary of $25,000 and contribute 6
percent, your annual contribution is $1,500. With a 50 percent match, your
employer will add another $750 to your 457 account. If you increase your
contribution to 10 percent, your annual contribution is $2,500 per year. Your
employer match, however, is limited to the first 6 percent of your salary and
remains at $750.
Information and interactive calculators are made available to you as
self-help tools for your independent use and are not intended to provide investment advice. We
can not and do not guarantee their applicability or accuracy in regards to your individual
circumstances. All examples are hypothetical and are for illustrative purposes. We encourage
you to seek personalized advice from qualified professionals regarding all personal finance
issues.
Note: The above information is not intended or written to be used as
legal or tax advice. It was written solely to support the sale of annuity products. As a
taxpayer, you cannot use it for the purposes of avoiding penalties that may be imposed under
the tax laws. You should seek advice on legal or tax questions based on your particular
circumstances from an independent attorney or tax advisor.
