401(k) Calculator

What a 401(k) actually is

A 401(k) is a US employer-sponsored retirement account that lets you contribute pre-tax (Traditional) or after-tax (Roth) dollars, which then grow tax-free until withdrawal in retirement. The “401(k)” name comes from Section 401(k) of the Internal Revenue Code, where the rules are codified. Roughly 60 million Americans contribute to 401(k)s — it’s the dominant retirement savings vehicle in the US.

Three things make 401(k)s powerful: tax advantages (immediate deduction for Traditional, tax-free growth for both), employer matching (effectively free money), and automatic payroll deduction (consistent contributions without willpower). Combined, these turn modest monthly amounts into seven-figure balances over a 30-40 year career.

The calculator above models all three forces: your contributions plus employer match growing at your expected return rate. The breakdown shows exactly how much of the final balance came from each source — for most workers, investment growth ends up being the largest single component by retirement.

Employer match — the free money

The single most important 401(k) feature for most workers. Employers offer match programs as a recruiting tool and retirement-savings incentive. Common structures: “50% match up to 6% of salary” (you contribute 6%, employer adds 3%), “100% match up to 4%” (you contribute 4%, employer adds 4%), or “dollar for dollar up to $5,000.”

The math on missing the match is brutal. If you earn $80,000 and your employer offers a 4% match, but you only contribute 2%, you’re leaving $1,600 per year on the table. Over 30 years at 7% return, that missed match compounds to ~$165,000 in lost retirement savings. This is why financial advisors universally say: capture the full employer match before doing literally anything else with your money — even before paying down high-interest debt in some cases.

How the calculator handles employer match

The “Employer match” input is the effective percent of your salary that the employer adds. Common translations:

• “50% match up to 6%” + you contribute 6%+ → enter 3%
• “100% match up to 4%” + you contribute 4%+ → enter 4%
• “100% match up to 3%, then 50% match for next 2%” + you contribute 5%+ → enter 4%
• “Non-elective contribution of 3%” → enter 3% (no contribution required)
• No match offered → enter 0%

If you don’t contribute enough to capture the full match, you’ll get less than the maximum. The calculator assumes you contribute enough to fully capture the match — adjust the “your contribution” and “employer match” values to reflect partial capture if relevant.

2025 contribution limits

The IRS sets annual limits on 401(k) contributions, indexed for inflation. For 2025:

• Employee contribution limit (under 50): $23,500
• Catch-up contribution (50+): additional $7,500 → $31,000 total
• “Super catch-up” (60-63): additional $11,250 → $34,750 total (new SECURE 2.0 provision)
• Combined employee + employer limit: $70,000 (under 50) or $77,500 (50+)
• Annual compensation cap: $350,000 (employer cannot match on income above this)

The calculator does not enforce these limits — if you enter “100% contribution” on a high salary, it’ll show the math but you’d be capped in practice. For realistic projections, ensure your percentage produces a number under the annual limit. If you’re a high earner contributing the max, set “your contribution” to whatever percent equals $23,500 (or $31,000 if 50+) on your salary.

Why max out matters

Maxing out 401(k) contributions is one of the highest-leverage moves in personal finance. $23,500/year for 30 years at 7% return grows to ~$2.4 million. Add another 30+ years of tax-free growth on top of that in retirement, and the final value is even more remarkable.

Traditional vs Roth 401(k)

Most 401(k) plans offer both Traditional and Roth options. The choice affects when you pay taxes, not how much the calculator projects.

Traditional 401(k)

• Now: Pre-tax contributions reduce your current taxable income. Save $7,000 in taxes on $23,500 contribution at 30% marginal rate.
• Later: Withdrawals in retirement are taxed as ordinary income.
• Best for: High-earners now expecting lower tax brackets in retirement.

Roth 401(k)

• Now: After-tax contributions — no immediate tax benefit.
• Later: Withdrawals in retirement are completely tax-free.
• Best for: Younger workers, lower current income, or expecting higher tax brackets in retirement.

Many workers split — 50/50 strategy

If you’re uncertain about future tax rates, splitting contributions 50/50 between Traditional and Roth hedges both ways. You get some immediate tax relief AND some tax-free retirement income. Many financial planners recommend this for mid-income earners.

401(k) Calculator FAQ

Why use a real (inflation-adjusted) return instead of nominal?

Real returns make planning simpler. If your projected $1.5M balance is in real terms (today’s purchasing power), you don’t need to separately inflate your target retirement income. The 7% default is approximate historical real return for a balanced portfolio. Use 5% for conservative, 9% for aggressive scenarios.

Does the calculator account for vesting?

No. Many employers have vesting schedules (e.g., 25% per year over 4 years) before you fully own the employer match. If you leave before fully vested, you forfeit unvested matches. The calculator assumes 100% vested. If you change jobs frequently, your effective match may be lower.

Should I prioritize 401(k) match before paying off debt?

Almost always yes. Employer match is typically a 50-100% instant return on your contribution. Even paying off 22% credit cards (high-rate debt) is a “return” of 22% — significantly less than 50-100% match. Capture the full 401(k) match first, then aggressively pay down high-interest debt, then maximize remaining 401(k) and IRA contributions.

What if my employer doesn’t offer a 401(k)?

You can contribute to an IRA (Individual Retirement Account) instead — $7,000/year limit in 2025, or $8,000 if 50+. SEP IRA or Solo 401(k) for self-employed gives much higher limits. The math is the same, just without employer match (set match to 0% in the calculator).

What happens to my 401(k) when I change jobs?

Four options: (1) leave it in your old employer’s plan, (2) roll over to your new employer’s plan, (3) roll over to an IRA (most common — gives you wider investment choices), (4) cash out (terrible — taxes plus 10% penalty if under 59½). Almost always choose options 1-3. The calculator works whichever you choose — same money, different account.

When can I withdraw without penalty?

Age 59½ is the standard threshold. Early withdrawal triggers 10% penalty plus ordinary income tax. Exceptions: hardship withdrawals, Substantially Equal Periodic Payments (SEPP / 72(t)), Rule of 55 (separated from service in year you turn 55+), and disability. Required Minimum Distributions (RMDs) start at age 73 (74 for those born 1960+).

How accurate is a 30-year projection?

The math is exact — but real returns will vary widely from the assumption. Market returns fluctuate; salary changes; employer match policies change. Treat the projection as a planning baseline, recalculate every 2-3 years as your situation evolves. The exact future balance won’t match this projection, but the order of magnitude will be useful.