Knowing exactly how much to contribute to an employer-sponsored 401(k) plan can be tricky. Some people fear saving too little. And even when others feel that they’ve saved enough, the future can prove otherwise. It’s estimated that you will need about 85% of your pre-retirement income in retirement. To help estimate whether you’re on the right track for a comfortable retirement, it’s important that you periodically use a 401k rate of return calculator to evaluate your account’s performance over the course of a year, and then use your rate of return percentage to estimate the future value of your 401(k) at retirement.

**Does 401k rate of return include contributions**

There are different ways to calculate your 401(k) rate of return. Most calculators will ask for basic information about your portfolio, and then divide your ending balance for the year by your beginning balance for the year.

Let’s assume you didn’t make additional contributions throughout the year. If your beginning balance on January 1 was $12,000, and your ending balance on December 31 was $12,600, your account increased by $600 in 12 months, which is a rate of return of 5%.

The good thing about a calculator is that it can estimate your rate of return based on different scenarios. For this reason, calculators can also factor in contributions you’ve made, which is important since these additions increase the total balance of your 401(k), and you earn interest off of this money, too.

Likewise, rate of return calculators can take into consideration dividends and withdrawals throughout the year to provide a better estimation of your return.

**Rate of return calculators**

The good news is that there are plenty of free online calculators to find the average rate of return on a 401(k). This way, you know the type of income to expect in retirement. Many calculators assume monthly deposits and a return that compounds annually.

A 401(k) calculator, of course, isn’t the only option when planning for the future. For example, you can use an IRA calculator, too. There are even advanced calculators that will include estimates for pension and Social Security benefits when calculating retirement income.

The key to a strong retirement savings is being proactive and knowing how your money performs from year-to-year and Money Crashers’ guide the to best investment for your 401k plan could be very useful. The way you manage your 401(k) (and other savings) plays a major role in a comfortable retirement. So become familiar with your average rate of return, and if you feel that your account could perform better, consider rebalancing your portfolio to achieve a higher return.

**Average 401k return last 20 years**

With regard to a 401(k), experts estimate annual rate of returns to be around 5% to 8%. To estimate how long (on average) it’ll take to double your money, divide your estimated rate of return into 72. Therefore, if your current rate of return is 6%, it’ll take about 12 years to double your money

Keep in mind that while a return of 5% to 8% is common, it’s not guaranteed. Some years your account may see a much higher rate of return, and other years, you may have a smaller return.

However, over the past 20 years or so, 401(k)s have been somewhat stable with regard to returns. For example, between 1998 to 2007, the average annual return with a 401(k) was about 5.4%. So, current rate of return estimations are fairly reliable for forecasting the growth of your retirement savings.

As far as 401(k) performance goes, some things are beyond your control, since the overall market dictates the value of a portfolio. But while you can’t control the market, you can take steps to maximize your return.

To start, increase how much you’re currently investing into your account. The more you sock away for retirement, the more opportunity to maximize your account balance.

Thanks to the power of compounding interest, making a few simple adjustments and contributing more to your 401(k) can have a tremendous impact on the growth of your portfolio. This is especially true if your employer also offers a 401(k) match program.

If you’re currently only contributing 2% of your income to a retirement account, bump this up to 3% a year, and then bump it up another percent next year. Set a goal of maxing out your retirement contribution, if possible. In 2018, you’re allowed to contribute a maximum of $18,000 in a 401(k), or $24,000 if you’re age 50 and over.

Also, be mindful of the fact that a 401(k) isn’t your only retirement savings option. If you’re already maxing out your 401(k), and you have extra income to play with, you can also contribute to an individual retirement account (IRA). You can contribute a maximum of $5,500 in 2018, or $6,500 if you’re age 50 and over.