1. What is 401k AFN?

AFN (Additional Funds Needed) for 401k represents the gap between your current retirement savings balance and your target balance. It helps you understand how much more you need to save to reach your retirement goals.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Target\ Balance \) — Your desired 401k balance at retirement (USD)
• \( Current\ Balance \) — Your current 401k savings balance (USD)

Explanation: The equation calculates the difference between where you want to be and where you currently are in your retirement savings.

3. Importance of AFN Calculation

Details: Calculating AFN helps in retirement planning by quantifying the savings gap, allowing you to adjust contributions, investment strategies, or retirement timelines accordingly.

4. Using the Calculator

Tips: Enter both target and current balances in USD. Both values must be positive numbers, with target balance typically larger than current balance.

5. Frequently Asked Questions (FAQ)

Q1: How do I determine my target 401k balance?
A: Consider your desired retirement age, expected expenses, other income sources, and life expectancy. Many financial advisors recommend aiming for 10-12 times your final salary.

Q2: Should I include employer matching in current balance?
A: Yes, include all contributions (yours and employer's) when calculating your current 401k balance.

Q3: How often should I recalculate AFN?
A: At least annually, or whenever your financial situation changes significantly (raise, job change, market fluctuations).

Q4: What if my AFN is negative?
A: A negative AFN means you've already reached your target. Consider whether to increase your target or adjust your savings strategy.

Q5: Does this account for investment growth?
A: No, this is a simple snapshot calculation. For comprehensive planning, consider projected investment returns and compound growth.