Anyone who’s looking forward to saving for retirement will be needing a 401(k) tax calculator. Understanding the 401(k) tax plan may come a bit complicated, especially if it’s time to choose what tax plan to get or how much 401(k) contributions you should give. Luckily, there are now a lot of 401 tax calculators readily available on the internet for easy computation and understanding of this plan. Here’s what you need to know about these tax calculators.
How 401(k) Tax Calculator Helps With Contributions
Introduction to 401(k)
Before the tax calculator, here’s a brief background about 401(k). 401(k) is a profit-sharing plan to help employees save up come retirement time. Rules for this tax plan are found in Section 401(k) of the US income tax code, hence its name. Through this plan, employers defer a part of your salary through various investment plans as part of your ‘retirement savings’. Employers may also match their employees’ contribution, with the amount depending on the how much the employees defer from their salary. For 2017, the maximum amount that an employee can contribute annually to a 401(k) is $18,000.
401(k) Options
There are two investment options available under the 401(k) plan:
- Traditional 401(k), wherein employee contributions to the plan are tax-exempt. But, an employee has to pay the taxes on contributions and interest earnings from withdrawn retirement savings. Employees can withdraw contributions and earnings anytime, but each transaction will be ‘penalized’ if done before the employee reach the age of 59 1/2.
- Roth 401(k), wherein employee contributions to the plan are not tax-exempt. But, earnings from withdrawn retirement savings are tax-free. Employees can withdraw anytime without penalty.
Plan Options Calculator
Can’t decide what option to take? Luckily, there are calculators easily available online that will allow you to see possible scenarios per plan option. For these calculators, such as this one or this one, you just have to input information like age, income, and other details to help with the computation. This will help you choose the best option for your current financial situation.
Contribution and Earnings Calculator
Tax Plan: 401(k) savers may still not be safe as tax fight goes on https://t.co/RxITaqGOVF #401(k) #tax
— David Chetlain (@DavidChetlain) November 10, 2017
After you’ve chosen the perfect 401(k) tax plan for you, you may also want to determine possible earnings from various contribution amounts. Or, if you’re an employer, you may want to know how much would you like to match your employees’ contribution. In these instances, there are also easily-available online calculators such as this one to make your computation fast. It has the same data fields as the plan options calculators to help you figure out future 401(k) contributions and earnings.
Benefits of 401(k) Calculator
Manually computing for 401(k) tax can be confusing, and even erroneous at time. This could be dangerous for taxpayers, and would be financially and legally costly for them. With the help of this calculator, computation of 401(k) contributions and earnings will be fast and accurate. All a taxpayer has to worry about is if’s able to input the right figures on the calculator.
Now you have a basic idea about the 401(k) tax and some helpful calculators to assist in computing 401(k) contributions, earnings, and options. To provide you a deeper explanation of what this tax plan is all about, here’s a video from Finance Wisdom For You.
Computations of 401(k) contributions are now made easy via readily-available 401(k) tax calculators online. Whether it’s determining what plan option you want to take or how much earnings you’re expecting to get, there’s a calculator ready to assist you.
Have you already tried any of these 401(k) tax calculators? Share your experiences with us in the comments section below.
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