Personal rate of return 401k calculator

*Distributions from your QRP are taxed as ordinary income and may be subject to an IRS 10% additional tax if taken prior to age 59 1/2. You avoid the IRS 10% additional tax, if you left your employer in the year you turned age 55 or older (age 50 for certain public safety employees). There are other exceptions to the IRS 10% additional tax for early distribution including: your death, being disabled, eligible medical expenses, taking substantially equal periodic payments (SEPP), qualified reservist distribution, birth or adoption expenses (up to $5,000), and involuntary IRS levies. Please visit IRS.gov for a complete list.

Table of Contents Show

What’s so great about a 401(k) for retirement planning?
What is an employer 401(k) match?
How do I calculate my personal rate of return on my 401k?
What is the average 401k rate of return?
How much will a 401k grow in 20 years?
What is a good monthly rate of return on 401k?

The financial calculator results shown represent analysis and estimates based on the assumptions you have provided, but they do not reflect all relevant elements of your personal situation. The actual effects of your financial decisions may vary significantly from these estimates - so these estimates should not be regarded as predictions, advice, or recommendations. This information does not constitute an application, offer or commitment by Wells Fargo & Company, or a representation of interest rates, investment performance or any other future performance. The accuracy of this calculator and its applicability to your circumstances is not guaranteed. You should obtain personal advice from qualified professionals. This information is provided for illustrative purposes only and is not intended to constitute legal, financial, or other advice. Wells Fargo Advisors and Wells Fargo & Company do not provide legal, accounting, or tax advice. Please consult your tax or legal advisors before taking any action that may have tax or legal consequences.

It’s a retirement savings plan named after the section of the tax code that authorizes it, and typically offered by for-profit corporations. Those who work for nonprofit organizations may have a similar plan, called a 403(b). Both allow you to contribute regularly to the plan via payroll deduction and to defer paying taxes until you withdraw the money in retirement.

A 401(k) plan offers a menu of investments, typically mutual funds, although some 401(k) plans have a brokerage option that lets you invest in individual stocks. Most plans offer stock, bond and money market funds, as well as funds that invest in all three categories. It’s up to you to decide how to invest your contributions.

What’s so great about a 401(k) for retirement planning?

Quite a few things. Having your contributions taken out regularly is more convenient than having to write a check to banks or investment firms every so often. That makes it more likely that you will continue to save, which makes it more likely you’ll have enough money to retire when the time comes.

But there’s more. Your contributions aren’t counted as income for taxes, which reduces your annual tax bill. For example, if you earn $50,000 a year and contribute $5,000 of your salary to a 401(k), you’ll shelter $5,000 from state and federal income taxes that year. If you’re in the 20 percent combined state and federal tax bracket, that will reduce your tax bill by $1,000.

Your earnings also won’t be taxed until you withdraw them. In a regular brokerage account, you’ll owe taxes on income and capital gains the year in which you receive them. A 401(k) allows your earnings to grow tax-free for as long as you keep the money in your account.

The tax deduction also means that your paycheck won’t be hit as much as it would without a 401(k). If you earn $50,000 a year, for example, you would need to save $417 a month before taxes to have $5,000 saved at the end of a year. If you saved that money in a 401(k), however, you would still contribute $417 a month, but your paycheck would be reduced by just $333 a month, because you’ve reduced your tax bill by more than $83 each month.

And investing regularly gives you the advantage of dollar-cost-averaging, meaning that you buy more shares of your funds when the price is low, and fewer shares when the price is high. Just as a smart shopper buys an extra bag of potato chips when they are on sale, you’re buying more shares of stock when they’re on sale.

What is an employer 401(k) match?

Some companies will also chip in to your 401(k). This is free money, and, as any financial advisor will tell you, free money is good. Suppose, for example, your employer matched every dollar you contributed with 50 cents, up to 5 percent of your salary. If you make $50,000 and save 5 percent, or $2,500, your employer would pitch in $1,250. Even if you earned nothing on your investments, your employer match would mean a 50 percent gain on your contributions — a level that would make hedge-fund managers green with envy.

This calculator is designed to show you how you could potentially increase the value of your retirement plan account by increasing the amount that you contribute from each paycheck. The Growth Chart and Estimated Future Account Totals box will update each time you select the "Calculate" or "Recalculate" button.

Pre-filled amounts
Based on our records, the following information may be pre-filled:

Salary

Pay period. If the information is not available, the default pay period is weekly.

Contribution

Your contribution rate. Note that we will use 8% as a default value if your contribution rate is not available or if your contribution is a dollar amount rather than a percentage.

Investment

Years invested (65 minus your age)
Your initial balance

You may change any of these values.

Using the calculator

In the following boxes, you'll need to enter:

Salary

Your annual gross salary.
Your expected annual pay increases, if any.
How frequently you are paid by your employer.

Contribution

The amount of your current contribution rate (how much you're currently contributing to your plan account).
The proposed new amount of your contribution rate. Be sure to verify the maximum contribution rate allowable under your plan. Also, pre-tax contributions are subject to the annual IRS dollar limit.

Pre-tax Contribution Limits 401(k), 403(b) and 457(b) plans2023$22,500After 2023May be indexed annually in $500 increments

You can enter the amount of your current and proposed contributions as a percent of your pay, or as dollar amounts per pay period.
Note: If you choose to enter these as dollar amounts, it is important that you select the appropriate pay period frequency, e.g., Weekly, Monthly, etc., in the Salary box. Also, if these are dollar amounts, your expected annual pay increases will be applied to these amounts.

Employer Match

The amount of your employer match, if any.
Use the "Additional Match" fields if your employer offers a bi-level match, such as 100 percent up to the first 3 percent of pay contributed, and 50 percent of the next 2 percent of pay contributed. In this example, you would enter 3 percent in the "Match Up to" field, and 5 percent in the "Additional Match Up to" field to indicate the combined total employer match.

Investment

The length of time that you anticipate you will invest this money.
The amount of your current account balance.
Your hypothetical assumed annual rate of return.

This box summarizes the figures in the chart:

Hypothetical Future Account Totals

The first field on the left shows you the hypothetical value of your account at the end of your specified time frame, at your current contribution rate and hypothetical assumed annual rate of return.
The second field, in the middle shows the hypothetical value of your account at the end of your specified time frame, at your proposed new contribution rate and hypothetical assumed annual rate of return.
The third field shows the difference between the two.
The Growth Chart provides details on how each source of your account balance could grow. Simply run your mouse over the chart, and the totals will appear in a pop-up box. Remember that the results you receive from the hypothetical growth calculation do not account for tax effects of any kind. Therefore, the dollar amount of your actual net distribution may be reduced by any taxes due.

Additional Savings Opportunities

2023
If you will be age 50 or older during the calendar year, you may receive a significant benefit as a result of the Economic Growth and Tax Relief Reconciliation Act of 2001. If your plan rules allow, the new law gives you the opportunity to make "catch-up" contributions to your retirement plan. You may now make an additional pre-tax contribution to your plan if you reach age 50 during the calendar year and have reached either the plan's or the IRS pre-tax contribution limit. The maximum catch-up contribution available is $7,500 for 2023.

For governmental 457(b) plans only:

2023
There is an alternative limit for governmental 457(b) participants who are in one of the three full calendar years prior to retirement age. Eligible participants may contribute up to double the deferral limit in effect (i.e. up to $41,000 in 2023.) You may use only one of the catch-up provisions (age 50 or regular) in a given year.

This is the only type of catch-up available for 457(b) Non-Government plans.

How do I calculate my personal rate of return on my 401k?

How to calculate a 401(k) annual return.

Take the ending balance and subtract any contributions you made over the past year..

Divide by the starting balance from one year ago..

Subtract 1 and multiply the result by 100. That will tell you the percentage total return..

What is the average 401k rate of return?

*Generally, financial planners say the expected rate of return for a 401k is between 8% and 10%.

How much will a 401k grow in 20 years?

You would build a 401(k) balance of $263,697 by the end of the 20-year time frame. Modifying some of the inputs even a little bit can demonstrate the big impact that comes with small changes. If you start with just a $5,000 balance instead of $0, the account balance grows to $283,891.

What is a good monthly rate of return on 401k?

Those on the conservative side believe your average 401(k) return will range between 5% and 8%. Others say you can expect between a 7% and 10% return. The difference comes down to which investments you choose, and what your asset allocation is for each fund.