401(k) Spend It or Save It Calculator

There are several ways to manage your 401(k) balance when you leave an employer. The most fundamental of which is should you spend it or save it? Depending on your age and tax bracket, making the wrong decision can cost you thousands of dollars both in taxes and lost earnings. This calculator helps illustrate the difference.

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Current age
Your current age.

Age of retirement
Age you wish to retire. We calculate the ending balance at retirement for each of your rollover options.

Federal income tax rate
Consult the table below to determine your federal tax bracket. If you are unsure, the calculator will choose 25%. Please note that state taxes are entered in a separate entry field.

Filing Status and Income Tax Rates 2009
Tax rateMarried filing jointly
or Qualified Widow(er)
SingleHead of householdMarried filing separately
10% $0 - 16,700 $0 - 8,350 $0 - $11,950 $0 - 8,350
15% $16,701- 67,900 $8,351- 33,950 $11,951- 45,500 $8,351- 33,950
25% $67,901- 137,050 $33,951- 82,250 $45,501- 117,450 $33,951- 68,525
28% $137,051- 208,850 $82,251- 171,550 $117,451- 190,200 $68,526- 104,425
33% $208,851- 372,950 $171,551- 372,950 $190,200- 372,950 $104,425- 186,475
35% over $372,950 over $372,950 over $372,950 over $186,475
Source: http://www.irs.gov/pub/irs-drop/rp-08-66.pdf

State income tax rate
The current State marginal tax rate you expect to pay on any additional income (or taxable distributions).

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

Annual rate of return
The annual rate of return for your 401(k) account. The actual rate of return is largely dependent on the type of investments you select. From January 1970 to December 2008, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 9.7% (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, from June 1982 through June 1983. The lowest 12-month return was -39%, which happened twice, once from September 1973 to September 1974 and again from November 2007 to November 2008. Savings accounts at a bank may pay as little as 1% or less but carry significantly lower risk of loss of principal balances.

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 generally 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 sales charges and other fees that funds and/or investment companies may charge.