401(k) Calculator
Project your 401(k) balance at retirement based on contributions and employer match.
The Formula
Including employer match:
Total Contribution = Employee + min(Employee, Match Cap) × Match%
Employer match: 50% up to 6% = $2,100/yr
Total/yr = $6,300 · 7% return · 30 years
= $595,000
How a 401(k) Works
A 401(k) is an employer-sponsored retirement savings plan that lets you contribute pre-tax dollars from each paycheck. Contributions reduce your taxable income in the year they are made, and the money grows tax-deferred — you pay no taxes on gains until you withdraw in retirement. The 2024 contribution limit is $23,000 per year, or $30,500 if you are 50 or older (catch-up contributions). Many employers add a matching contribution on top of what you contribute, making the 401(k) one of the most powerful wealth-building tools available to working Americans.
Never Leave the Employer Match on the Table
If your employer offers a 401(k) match, contribute at least enough to capture every dollar of that match before anything else. A common structure is 50% match up to 6% of salary — meaning if you contribute 6%, your employer adds 3% for free. That is an immediate 50% return on that portion of your savings before any market growth whatsoever. Think of it as part of your compensation: if you are not capturing it, you are effectively declining part of your pay.
Traditional 401(k) vs. Roth 401(k)
Many employers now offer both options. Traditional contributions are pre-tax — you reduce taxable income today and pay taxes on withdrawals in retirement. Roth contributions are after-tax — you pay taxes now but qualified retirement withdrawals are completely tax-free, including all the growth. If you expect to be in a higher tax bracket in retirement than you are today, Roth tends to win. If you expect a lower bracket, traditional tends to win. Many advisors recommend splitting between both to create tax flexibility in retirement, because nobody knows exactly what tax rates will look like in 20–30 years.
Frequently Asked Questions
What is a good 401(k) contribution rate?
At minimum, contribute enough to capture the full employer match — that is free money. Beyond that, aim for a total retirement savings rate of 15% of gross income including the match. If your employer matches 5%, you need to contribute 10% yourself to hit 15%. Increase your contribution by 1% each year until you reach the annual maximum. If you started saving late, contributing as much as possible and working a few extra years makes a significant difference.
What happens to my 401(k) when I change jobs?
You have four options: leave it in your former employer's plan, roll it to your new employer's 401(k), roll it to an IRA (gives you more investment options and flexibility), or cash it out. Cashing out is almost always the worst choice — you owe ordinary income tax plus a 10% early withdrawal penalty if you are under 59.5. Rolling to an IRA or new employer plan preserves the tax-deferred status and keeps compounding working for you.
When can I withdraw from my 401(k) without penalty?
Penalty-free withdrawals begin at age 59.5. Required Minimum Distributions (RMDs) start at age 73. Early withdrawals before 59.5 trigger a 10% penalty plus ordinary income taxes, with limited exceptions for certain medical expenses, disability, and substantially equal periodic payments. Roth 401(k) contributions (not earnings) can be withdrawn penalty-free at any time since you already paid tax on them.
What should I invest in inside my 401(k)?
Most advisors recommend low-cost index funds for the core of a 401(k). Target-date funds are a simple all-in-one option that automatically shift from aggressive to conservative as you approach retirement. If your plan offers a total stock market or S&P 500 index fund with low expense ratios (under 0.2%), that is usually a strong foundation. Avoid high-expense actively managed funds — fees compound over decades and significantly erode returns.
Can I have both a 401(k) and an IRA?
Yes. You can contribute to both in the same year, subject to each account's limits. A common priority order: contribute to 401(k) up to the employer match, then max out a Roth IRA ($7,000 in 2024, $8,000 if 50+), then return to the 401(k) up to the annual limit. This combines the best of both account types and gives you both pre-tax and after-tax retirement income in the future.