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401(k) Spend or Save

There are several ways to manage your 401(k) balance when you leave an employer. The most fundamental of which is should you spend it or save it? Depending on your age and tax bracket, making the wrong decision can cost you thousands of dollars both in taxes and lost earnings. This calculator helps illustrate the difference.

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*You may have one or more of the following options available for saving your money: rolling it into an IRA, moving it into your new employer's plan, or leaving it with your old employer. You should keep in mind that this amount represents pre-tax funds held within the retirement plan. Distributions are subject to income tax (distributions prior to age 59 1/2 may also be subject to a 10% additional tax penalty).

Definitions

Current age
Your current age.

Age of retirement
Age you wish to retire. We calculate the ending balance at retirement for each of your rollover options.

Federal income tax rate
Consult the table below to determine your federal tax bracket. If you are unsure, the calculator will choose 25%. Please note that state taxes are entered in a separate entry field.

Filing Status and Income Tax Rates 2007 Caution: Do not use these tax rate schedules to figure 2006 taxes. Use only to figure 2007 estimates.
Tax rate	Married filing jointly or Qualified Widow(er)	Single	Head of household	Married filing separately
10%	$0 - 15,650	$0 - 7,825	$0 - $10,200	$0 - 7,825
15%	$15,651- 63,700	$7,826- 31,850	$11,201- 42,650	$7,826- 31,850
25%	$63,701- 128,500	$31,851- 77,100	$42,651- 110,100	$31,851- 77,100
28%	$128,501- 195,850	$77,101- 160,850	$110,101- 178,350	$64,251- 97,925
33%	$195,851- 349,700	$160,851- 349,700	$178,351- 349,700	$97,926- 174,850
35%	over $349,700	over $349,700	over $349,700	over $174,850

Source: http://www.irs.gov/formspubs/article/0,,id=164272,00.html

State income tax rate
The current State marginal tax rate you expect to pay on any additional income (or taxable distributions).

Current 401(k) balance
The starting balance or current amount you have invested or saved in your 401(k).

Annual rate of return
The annual rate of return for your 401(k) account. The actual rate of return is largely dependant on the type of investments you select. From January 1970 to December 2006, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 11.5% per year (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, and the lowest was -39%. Savings accounts at a bank pay as little as 1% or less.

It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect additional sales charges and fees that funds may charge.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We can not and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Unless indicated otherwise: intraday data is at least 15 minutes delayed; mutual fund NAVs are updated at the close of every market day; all prices are in the local currency; Time is ET.