Your salary is projected year-by-year using compound growth:
Salary(year) = Current Salary × (1 + Annual Increase)^years
Example: $50,000 salary with 2% annual increase becomes $51,000 in year 1, $52,020 in year 2, etc.
Each year, contributions are calculated based on your projected salary:
Employee Contribution = Salary × Your Contribution %
Employer Match = Salary × Employer Match %
Total Contribution = Employee + Employer
Example: At $50,000 salary with 9% employee and 3% employer match = $4,500 + $1,500 = $6,000/year
Your account balance grows annually based on your expected rate of return:
Interest = (Previous Balance + This Year's Contributions) × Rate of Return
Example: $100,000 balance + $6,000 contributions with 6% return = $6,360 growth
The calculator runs this process for each year until retirement:
The "Purchasing Power" value shows what your final amount would be worth in today's dollars:
Real Value = Final Amount / (1 + Inflation Rate)^years
Example: $1,000,000 in 30 years with 3% inflation = $412,000 in today's purchasing power