Tax Savings Calculator

[Guest MikeD]

Help...I'm looking for a good online calculator to show an employer the tax benefits of adopting a 401(k) plan. Basically, what I am looking for would show them what their overall financial position would be if they 1) don't adopt a plan and simply invest their money after paying taxes or 2) adopt a plan, make employee contributions and invest the remainder tax-deferred.

Example: Hsband and wife can contribute $70k to a plan and the employee cost would be $10k. The client has said, "why don't I just pay tax on the $80k and invest everything after tax, since I will have to pay tax on the $70k later?"

Thanks!

[SteveH]

Then sell him a Roth 401(k).

[JanetM]

If you invest after tax you start will smaller account balance. If you invest pretax you make contributions earlier, those contributions are invested longer and therefore earn more.

Is same as depositing $100 now or $50 now. What is worth more later????

[Guest MikeD]

If you invest after tax you start will smaller account balance. If you invest pretax you make contributions earlier, those contributions are invested longer and therefore earn more.

Is same as depositing $100 now or $50 now. What is worth more later????

I understand the concept. I was just hoping to locate a good online calculator that he could play with so he could convince himself. I can prepare an example for him, but I was hoping to point him toward something he can use himself.

[Blinky the 3-eyed Fish]

It gets a lot more complex when you factor in taxes paid along the way, whether that be capital gains or whatnot, versus the tax-deferred growth of the income. That is an important factor to show the true benefit of a retirement plan.

[austin3515]

I feel your pain. I would love to one day invent such a thing, but I don't think it exists, because there are so many variables, like:

age

interest rates

future rates of return

payroll taxes

future tax rates

There must be more!

Still it would be nice if there was a template where you could make your own assumptions about all of these things.

Someone mentioned Roth, but even the Roth/Regular 401(k) decision would be illuminated by such a calculator. If I ever get to it, I'll post it on these boards.