Estimating Necessary Contributions in Your 401k for Retirement

When evaluating your 401k retirement plan, it is important to determine how much you need to contribute in order to live comfortably during retirement. Most people do not know how much they need to set aside out of each paycheck in order to ensure that they can retire someday. Here are a few things to consider about estimating necessary contributions for your 401k.

Choosing a Percentage

Typically, most people will choose a certain percentage from each paycheck to go directly into their 401k account. By doing this, you are making the process automatic and simple. However, choosing the right percentage can be difficult. For example,let's say that you make $40,000 per year and you want to set aside 10% of your income. You plan on working for the next 35 years and your employer provides you with a 50% match on contributions up to 6% of your income. After 35 years, at an annual return of 8%, you would have approximately $950,000.

Using Retirement Calculators

In order to make sure that you have enough set aside for retirement, you should consider using a retirement calculator to help you with your planning. There are many different variables that could change in the previous example such as leaving work sooner, not making enough return, or a salary change. In order to guarantee your success, you need to play with all of the different variables involved in set aside the appropriate percentage of your income.

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