How do I model Defined Contribution plans such as a 401k plan?

Defined Contribution plans

Defined Contribution (DC) plans are a type of retirement savings plan where the amount contributed is defined, but the future benefit is not. For example, you might contribute 3% of your salary to a 401(k) at work, but the total account balance at retirement varies based on contribution consistency and investment performance over time.

Examples: 401(k), 403(b), IRA, Roth IRA, RRSP, TFSA, and UK Workplace Pension.

Accessing existing DC accounts

Go to Current Finances in the left sidebar > Investments > choose the account you want to review.

Adding new DC accounts in Current Finances

Go to Current Finances in the left sidebar > Investments > scroll down and click + Add Investments > Employer Retirement Accounts > choose your account type (401(k), 403(b), and more).

A new line item will appear where you can rename the account, enter the total balance, and confirm the owner.

Adding details to DC accounts in a plan

To input full details such as growth rate, bond allocation, and more, we recommend reviewing the Create a New Plan article and updating the details of your account there.

Once you have a plan, click the plan > scroll down to Accounts > click your account > click the pair of arrows in the top right corner to expand all sections.

Your account name and balance will already be set from Current Finances.

Growth

Set the annual investment growth rate for this account. ProjectionLab defaults to 7%. You can also set the Dividend Yield (annual dividend yield, default 1.5%).

For each, click the default to switch to:

• Fixed rate: a fixed rate specific to this account
• Custom: a growth rate schedule that changes over time
• None: if there is no dividend yield or investment growth

Bonds

Set a bond allocation for this account. If none is configured, the default is None. Click the dropdown and choose Custom to build your own bond allocation.

Fees

Enter an annual fee charged by the account provider or fund. The default is % of balance. You can switch to % of earnings, Today’s Currency, or Actual Currency.

Liquidity

Determines when this account is accessible in your projections. 401(k) accounts typically have penalties for withdrawals before a qualified retirement age. Options include:

• Withdrawals: when withdrawals are allowed (always, never, after qualified withdrawal age, or after a specific year)
• Liquid: whether this account counts toward your liquid net worth (always, never, when withdrawals are allowed, or after qualified withdrawal age)
• Early Withdrawal Penalties: toggle on or off; if on, set the Qualified Age and Penalty Rate
• Qualified Age: the age when withdrawals no longer incur a penalty
• Penalty Rate: the rate applied to early withdrawals

Required Minimum Distributions (RMD)

Select the appropriate RMD type: US Retirement Account RMDs, Custom Distributions, or None.

Roth Conversions

Move funds from a traditional retirement account to a Roth IRA for tax-free withdrawals in retirement. Not available for all account types.

72T Distributions (SEPP)

Configure 72(t) distributions for penalty-free early access to retirement funds following IRS rules. Options: None, RMD Method, Fixed Amortization, or Custom Amount.

Flows

Add a flow to direct unspent income to this account, or add a transfer to move funds between this account and another. See the Account Transfers article for more.

Click Save to finalize your DC account settings.