Looking to estimate your 401(a) savings withdrawals in the future? Our free online 401(a) calculator can help. Enter your current retirement savings balance and projected annual growth rate, and our calculator will do the rest! This is a great tool for anyone looking to know how much they’ll need to be saved up for retirement.
401a Savings Calculator
Use our 401(a) savings calculator to estimate your retirement savings. Input your annual contribution limits, maximum employer matching contributions, and assumed annual rate of return.
401a Withdrawal Calculator
As retirement age approaches, many people start to worry about how they will withdraw from their retirement savings plan. One option that can provide peace of mind is an annuity with a guaranteed lifetime withdrawal benefit (GLWB).
An annuity is an insurance policy that guarantees to distribute a paycheck to you for the rest of your life, even after the 401(a) retirement plan runs out of money. This can provide much-needed security in retirement, knowing that you will have a regular income stream no matter what happens with your other retirement savings. In addition, an annuity can help to automate the retirement withdrawal process for 401a retirement plans, making it one less thing you have to worry about.
So, if you are approaching retirement age and are wondering how to best withdraw from your retirement savings, an annuity with a GLWB may be worth considering.
Note: You can purchase an annuity (with no tax penalties) with your 401(a) retirement plan, 401(k), IRAs, retirement accounts, investments, and cash.
401(a) Withdrawal Comparison
Historically financial advisors recommend withdrawing 4% from your 401(a) and adjusting for inflation. However, the 4% rule has been debunked as a safe withdrawal rate. New research concludes as low as 2.8% is the new rule. The following table compares rolling your 401(a) into a new annuity with withdrawing income yourself or utilizing an advisor.
| Features | Annuity | 401(a) | IRA | Roth IRA |
|---|---|---|---|---|
| Withdrawal Percentage | 5.20% – 6.55% | 4% | 4% | 4% |
| Can Income Increase? | Yes | Yes | Yes | Yes |
| Can Income Decrease? | No | Yes | Yes | Yes |
| How Long Will Money Last? | Lifetime | 30 Years+ | 30 Years+ | 30 Years+ |
| Annual Fees | 0 – 1.50% | 1% – 4% | 1% – 4% | 1% – 4% |
| Taxation | Taxable/Tax-Free | Taxable | Taxable | Tax-Free |
| Death Benefit | Account Balance | Account Balance | Account Balance | Account Balance |
Example: A 60-year-old retiree starts withdrawing immediately from their $1 million portfolio, they would receive:
What Is A 401(a) Plan?
A 401(a) is a type of employer-sponsored retirement plan that allows for contributions from the employer, employee, or both in the form of either percentages or fixed dollar amounts. The company that offers the401(a) establishes eligibility and vesting schedules. Employees can choose to withdraw their money from a 401(a) by transferring it to another qualified retirement plan (rollover), taking all funds at once as a lump sum payment, or receiving it gradually over time through an annuity.
How Does A 401(a) Retirement Plan Work?
There are a variety of retirement plans that employers can offer their employees, each with different features and restrictions. Some retirement plans may be better suited for certain types of employers.
A 401(a) plan is a retirement savings plan commonly offered by employers to eligible employees. Employees who typically participate in the 401(a) plan work for government agencies, educational institutions, and non-profit organizations. This includes but is not limited to: government employees, teachers, administrators, and support staff.
The features of a 401(a) plan are nearly identical to that of a 401(k) plan, which is more common in for-profit industries. The one exception is that employees cannot contribute to their 401(k) plans through payroll deductions.
If an individual leaves an employer, they can still maintain ownership of the funds by transferring them into a different 401(k) plan or individual retirement account (IRA).
Employers can have several 401(a) plans, each with varying eligibility requirements, contribution levels, and vesting schedules. Employers set up these plans to incentivize employee retention. The employer manages the plan and sets how much employees can contribute.
The minimum requirement to participate in a 401(a) plan is usually two years of employment and 21 years old; however, this can differ.
401(a) Plan Contributions
An employer-sponsored 401(a) retirement savings plan. This type of account may have after-tax or pre-tax contributions, which the employer gets to decide. The employer also sets up how much they will contribute on behalf of each employee. Some common options include a set amount deposited into an employee’s account, matching fixed percentages of employee contributions, or dollar-for-dollar matches within a designated range.
Most voluntary 401(a) plan contributions people make are limited to 25% of what they earn in a year.
Investing In A 401(a) Plan
Employers who choose 401(a) have greater command over where their employees invest. Government employers often restrict investment opportunities to only the safest and most secure options to reduce the chance of risk. A 401(a), while it does guarantee retirement savings, necessitates the employee taking care to reach retirement goals.
401(a) Plan Withdrawals And Vesting Schedules
Any 401(a) employee contributions and the earnings on those contributions are immediately fully vested. However, employer vesting schedules for full rights to the company’s matching 401(k) contributions usually depend on years of service as an incentive for employees to stay with the business.
Employees will face income tax withholdings and a 10% early withdrawal penalty from the Internal Revenue Service (IRS) if the employee is younger than 59½, passes away, becomes disabled, or rolls over the 401(a) into a qualified IRA or retirement plan through a direct trustee-to-trustee transfer when they withdraw from their plan.
Tax Credits
If you contribute to a 401(a) plan, you could be eligible for a tax credit. And, it’s possible to have both a 401(a) and an IRA simultaneously. With that said, though, your traditional IRA contributions might not qualify for the same tax benefits if you already have a 401(a). This is all contingent on your adjusted gross income.
Next Steps
As retirement age approaches, many people start to worry about how they will withdraw from their retirement savings plan. One option that can provide peace of mind is an annuity with a guaranteed lifetime withdrawal benefit (GLWB). Contact us today if you’re looking for more information on 401(a)s or are interested in getting a quote for an annuity with a GLWB. Our team would be happy to help you plan for your future.
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