Originally Posted by
Freighthumper
You are missing a big part of the equation. IF this plan takes effect, the contribution won’t actually be 11%. (Nor will the DC contribution be a full 9%) The actual contribution will be 11% of earnings up to the IRC 401(a)(17) limit (28.C.7.) That limit for 2023 is $330,000. Some years it may increase, but that’s not guaranteed as it’s controlled by the IRS.
since I have the thread open and I can easily feed the AI to build on the answer…
”To calculate the accumulated balance after 25 years and the corresponding annual distribution at a 4% withdrawal rate, let's use the provided assumptions.
The formula for the accumulated balance after 25 years, considering an 11% contribution up to the IRC 401(a)(17) limit and a 5% annual return, is:
Accumulated balance = (0.11 * min(Earnings, $330,000)) * [(1 + 0.05)^25 - 1] / 0.05
Let's calculate the accumulated balance:
Accumulated balance = (0.11 * $330,000) * [(1 + 0.05)^25 - 1] / 0.05
Accumulated balance ≈ $2,408,382
Now, let's calculate the estimated annual distribution in retirement at a 4% withdrawal rate:
Annual distribution in retirement = 0.04 * Accumulated balance
Annual distribution in retirement = 0.04 * $2,408,382
Annual distribution in retirement ≈ $96,335
Based on the provided assumptions, it is estimated that after 25 years, the accumulated balance in the market-based cash balance plan would be approximately $2,408,382. At a 4% withdrawal rate, the estimated annual distribution in retirement would be around $96,335.
Please keep in mind that these calculations are based on the assumptions provided and do not account for fees, taxes, inflation, or other factors that may affect the actual distribution amount. It is important to consult with a financial advisor or retirement planning professional for a more accurate analysis tailored to your specific circumstances.”