Predicting what a 403b retirement account will eventually be worth is very challenging. There are a lot of variables to take into account that could make a huge difference in the growth of your nest egg. There are not only your annual contributions and return on investment to consider, but also investment fees, expected salary increases, employer contributions, years to retirement, and more. While definitely, it’s impossible to predict the exact performance of your retirement account, our 403b Calculator can help you nail down a good ballpark figure or from best-to-worst case scenarios for the growth of your 403b account up through your retirement. It also lets you feel how making some changes, like increasing contributions or working longer, will affect the eventual size of your retirement account and guide you in making financial decisions.
What are 403b Accounts?
403b plans are a type of defined contribution retirement account that is available to certain employees of schools and various nonprofit organizations, which includes hospitals, charities, and members of the clergy. They are almost identical to 401(k) plans, which are the type used in the for-profit sector, with some differences.
A 403b is a type of tax-sheltered annual plan, which allows you to invest pretax earnings in a retirement account and allow the funds to grow tax-free as well. You are only taxed on the disbursements you take after retirement, though you will likely have to pay around a 10 percent penalty on any money you withdraw before age 59 ½.
As with a 401(k), your employer can make tax matching contributions to your account, which you are only taxed on when you make withdrawals.
One more option is a 403b, in which you make after-tax contributions, but your earnings and eventual withdrawals are tax-free, provided the latter are qualified distributions.
As with a 401(k), there is also a limit on how much contribution you can make to a 401(b) each year. As of 2016, the above-described figure is $18,000, though investors age 50 and older can make an additional “catch-up” contribution of up to $6,000 a year, for a maximum of $24,000.
Those who have worked at the same nonprofit for at least 15 years can make some contribution of $3,000 a year, regardless of age, provided their former contributions which may have averaged less than $5,000 a year.
Note that you typically designate your contributions as a percentage of your income and not as a figure.
How to use the 403b calculator
The 403b calculator will not just take into account your current salary, but the 403b calculator also anticipated salary increases and the higher contributions you can expect as a result.
Most of the entries in the 403b calculator are self-explanatory, but then some of the following may be helpful. These are the terms related to the 403b calculator:
Annual salary: Enter your total pretax salary, before any type of deductions.
Percent to contribute The percentage of your annual salary that you are having withheld to invest in your 403b using our 403b calculator.
Current age: How old you are right now.
Age of retirement: The common age is 65, but playing around with this figure by adjusting the sliding green triangle will give you an idea of the financial impacts of delaying or taking an earlier retirement.
Current 403b balance: How much is currently in your 403b account if you already have one.
The annual rate of return: The average return on your investments that you expect to earn between now and retirement. You will be surprised after knowing how many small changes in this figure can change the amount available to you at the time of retirement.
Annual salary increase: Annual raises will increase the contributions made by both you and your employer to your 403b.
Annual investment fee: Whatever your Sponsor charges every year for managing your account. Though the number may seem to be small, this can have a large impact on the long-term growth of your account, as this might come right off the top of any earnings.
Total employee contributions: The 403b calculator will determine this for you.
For contributions of employers:
Percent of salary: This is the employer’s annual match, as a percent of your salary.
Amount per year: An alternate method to the above, if your employer contributes some fixed amount rather than a percentage of your salary.
Total employer contributions: It will be determined by the 403b calculator.
When you have completed filling in the information, the 403b calculator will show you how much you can expect your 403b account to contain at the time your retire. For a more complete breakdown, click “Calculate” at the bottom of the page.