457 Plan: Roth vs. Pre-tax Calculator for Free
If you are thinking about an efficient way for a sound retirement plan, you can think about the 457 savings plan. You are allowed to contribute to 457 on an after tax-basis and at the time of withdrawing money, you also do not need to make tax payment on qualified distributions. Some investors may find it superior for them than pre-tax basis contribution. This calculator will help you to set out a perfect retirement plan for a safe and sound post-retirement life.
- Current age
- Your age.
- Age of retirement
- This planned age of your retirement. It is presumed by 457 that you are going to contribute to the account till the previous year before your retirement. Your final payment in 457 will take place exactly at the age of 62 if your retirement age is 63.
- Annual contribution
- The amount of annual contribution to the 457 account. It is assumed that you need to make your annual contributions of annuity due basis. The amount of yearly maximum for 2013 was $17,500. A ‘catch-up’ allowance system permits you to make additional payment to 457 account if your age is 50 or more. As a result of this ‘catch-up’ allowance system, you could additionally contribute $5,500 to the 457 in 2013. Your yearly maximum contribution limit to 457 account is not affected by the employers matching payment. Inflation indexes both the annual maximum & ‘catch-up’ allowance.It is an essential matter to remember that employees who are paid high amount of remuneration by the company have contribution limit to 457. You should contact with your employer whether such contribution limit is applicable for you or not.
- Invest tax savings
- This is about your investments in any tax savings created by your contributions to a pre-tax 457 account. The total cash flow between the two account types can be balanced by investing your tax savings annually. For example, your actual price for the pre-tax contribution considering taxes will be $750 if you contribute $1,000 to your 457 with a 25% income tax rate. In fact, every year you are spending more money with the Roth option if you are not going to invest the difference amount. Your spending will lead to a favorable Roth type savings plan.
- Maximize contributions
- You can increase the amount of yearly contributions to the highest limit permitted by the federal tax authority. This incremental contribution will take into account the foreseeable periods which must meet the criteria for catch-up contributions. The yearly maximum contribution is $17,500 for 2013. Your maximum contribution is going to be increased by the additional $5,500 of catch-up provision while you are 50 years old or more.
- Expected rate of return
- The expected rate of return from the 457 accounts. The actual rate of return relies on the investment portfolio. By reinvesting the dividend in the capital structure, the S&P made 7.1% annual return in last 10 years & almost 10.1% annual return in last 43 years. But the annual rate of return of the S&P was not stable. This type of instability in earnings may lead to capital loss. So, it is better to deposit money in the savings account of Banks as it offers as little as 0.25% or less interest rate but minimizes the risk of capital loss.
- Current tax rate
- Present marginal tax rate that you need to pay on your taxable investments.
- Retirement tax rate
- This is about the marginal tax rate that you anticipate to pay on your investments at the time of your retirement.
- After tax total at retirement
- This is about the full value of the account for the Roth 457. The total value of the account for the pre-tax 457 has two portions. First portion is the payment of income tax on the total income & tax deductible payments. The other is the earnings from the investment of income tax savings.