403(b) plans are only available for employees of certain non-profit tax-exempt
organizations: 501c(3) corporations, 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 helping to create a secure retirement. It provides you with two important advantages.
First, all allowable 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taxes on contributions and earnings when the money is withdrawn.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 percent to 100 percent of
your contributions. The combined result is a retirement savings plan you cannot afford to pass
up. Click View Report to see your total results summary.
Definitions
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 100 percent of their annual
income, subject to an annual maximum.
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.
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 403(b). So if you retire at age 65,
your last contribution happened when you were actually 64.
Current 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 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.
Annual salary increase
The annual rate you expect your salary to increase. We assume that your
salary will continue to increase at this rate until you retire.
Annual investment fee
This is an annual fee based on the balance of the account.
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. 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, 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 403(b) 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.
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. 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 403(b) account. It is also
important to note that employer contributions do not affect an employee's
maximum annual contribution limit.
In addition, an additional catch-up provision for participants who 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.
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.
