401(k) calculator — savings and planning simplified

Quite a few things. Having your contributions automatically deducted from your paycheck is more convenient than having to periodically write a check or make a transfer to a bank or

investment firm. That also makes it more likely that you will continue to save, which in turn makes it more likely you’ll have enough money to retire when the time comes. But there’s more.

With a traditional 401(k), your contributions aren’t counted as income for tax purposes; that 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 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.  And the returns on those investments won’t be taxed until you withdraw them. In a regular brokerage account, you owe taxes on income and capital gains for 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.  And investing regularly gives you the advantage of dollar-cost-averaging: By

investing the same amount consistently, at regular intervals, you are effectively buying more shares of your investment when stock prices are low and fewer when prices are high. Just as a

smart shopper might buy more of a favorite item when it’s on sale, you’re buying more shares of stock when they’re on sale.