About the 401K Calculator
A 401(k) calculator projects how an employer-sponsored retirement account grows over time given your contribution rate, employer match, expected return, and years until retirement. Because contributions and employer matching dollars are tax-advantaged, the 401(k) is, for most U.S. workers, the single most important wealth-building account they have access to.
The employer match is the highest-return investment most people will ever make
A typical employer match is 50% on the first 6% of salary (a "50 cents on the dollar up to 6%" plan). On a $70,000 salary, contributing 6% means $4,200 of your money plus $2,100 from your employer — an immediate, risk-free 50% return on the matched portion. There is no other broadly available investment that offers anything close to that.
Failing to contribute at least up to the full match is leaving compensation on the table. Among workers who had access to a 401(k) match, surveys have consistently found that a meaningful share — often around 1 in 5 — contribute below the match threshold. If money is tight, the math still favors at least matching the match; cut elsewhere first.
Traditional vs. Roth 401(k)
A traditional 401(k) reduces your taxable income today: you contribute pre-tax dollars, your investments grow tax-deferred, and you pay ordinary income tax on withdrawals in retirement. A Roth 401(k) is the reverse: contributions are made with after-tax dollars, the account grows tax-free, and qualified withdrawals are tax-free.
The standard heuristic — Roth if you expect to be in a higher tax bracket in retirement, traditional if you expect to be in a lower one — is reasonable but oversimplified. In practice, tax diversification (holding both) is valuable, because future tax rates are uncertain and having both types of accounts gives you flexibility to manage tax brackets in retirement. Younger workers in lower current brackets often lean Roth; mid- and late-career workers in peak earnings years often lean traditional.
Crucially, employer matching contributions are always made pre-tax (in a traditional sub-account) regardless of which type of contribution you make. Even if you contribute 100% Roth, your match dollars are traditional.
Contribution limits and catch-ups
The IRS sets annual contribution limits for elective employee contributions to a 401(k); these limits are adjusted for inflation. Workers age 50 and over can make additional "catch-up" contributions on top of the regular limit. Employer matching contributions don't count against your individual limit but are subject to a separate combined limit on total annual additions.
Always check the current year's limit on the IRS website before maxing out — the figure changes nearly every year. A calculator can help you see whether maxing out is feasible given your cash flow and other goals.
Vesting: when employer money becomes yours
Your contributions are always 100% yours. Employer matching contributions, however, are often subject to a vesting schedule — meaning if you leave the job before a certain tenure, you forfeit some or all of the match. Common schedules: cliff vesting (0% until year 3, then 100%) and graded vesting (20% per year over 5 years).
When changing jobs, factor unvested match dollars into the decision. Leaving 6 months before fully vesting can mean walking away from thousands of dollars; sometimes a slight delay in a job change is worth a meaningful raise in the form of recovered vesting.
Compounding: the case for starting early
The most consequential variable in a 401(k) projection is years invested. A 25-year-old contributing $500/month at a 7% real return ends with roughly $1.2 million at age 65. A 35-year-old contributing the same amount ends with roughly $570,000 — less than half, despite contributing only 25% less in total. The first decade of contributions does the most compounding work.
If you're starting late, the lever that matters most is contribution rate, not return. Trying to compensate for a late start with aggressive investments is a common, expensive mistake; a high savings rate dominates a marginally better return at every horizon under 20 years.
How it works
- Enter income and contribution rate. Salary and the percentage you'll contribute each pay period.
- Add the employer match. Most plans match a percentage of contributions up to a salary cap (e.g., 50% of contributions up to 6% of salary).
- Project growth. Each year's contribution (yours plus employer's) is compounded at the expected return for the remaining years to retirement.
- Adjust for inflation. Final balance can be expressed in today's dollars to reflect real purchasing power, not just nominal value.
Formula
- FV = Future value at retirement
- P = Current 401(k) balance
- PMT_self = Your annual contribution
- PMT_match = Annual employer match
- r = Expected annual return
- n = Years until retirement
Worked examples
Capturing the full match early in a career
Age 25, $70,000 salary, contributing 6%, employer match 50% up to 6%, 7% real return, retiring at 65. Annual contributions: $4,200 self + $2,100 match = $6,300/year. Projected balance ≈ $1.26 million in today's dollars.
Starting 10 years late at the same rate
Same numbers but starting at 35: projected balance ≈ $580,000 in today's dollars — under half the value of the early start. The decade of skipped compounding cost ~$680,000.
Contributing below the match
Age 25, contributing 3% instead of 6% on $70,000 salary, same plan: $2,100 self + $1,050 match = $3,150/year (vs. $6,300). Projected balance ≈ $630,000. Half the contribution, half the match — and half the retirement.
Frequently asked questions
How much should I contribute to my 401(k)?
At minimum, contribute enough to capture the full employer match — that's a guaranteed return that's hard to beat anywhere else. Beyond that, a common target is 15% of gross income (including the match) directed at retirement. Maxing the IRS annual limit is appropriate for high earners who can afford it.
What's a realistic rate of return assumption?
Long-run U.S. stock returns have averaged about 10% nominal and 7% real (after inflation) over many decades. Use 6–7% real for projections in today's dollars. Assuming 10% nominal without modeling inflation produces unrealistically large numbers.
Can I contribute to both a 401(k) and an IRA?
Yes. The contribution limits are independent. However, the deductibility of traditional IRA contributions phases out at higher incomes if you (or your spouse) are covered by a workplace plan. Roth IRA contributions phase out separately at higher incomes.
What happens to my 401(k) if I change jobs?
You generally have four options: leave it with the old employer (if allowed), roll it into the new employer's plan, roll it into an IRA, or cash out (almost always a costly mistake — 10% penalty if under 59½, plus ordinary income tax). Rolling to an IRA gives the most investment flexibility; rolling to a new 401(k) preserves access to backdoor Roth strategies.
Should I take a 401(k) loan?
Generally avoid it. While you do pay yourself back with interest, the borrowed amount is no longer compounding, you pay back with after-tax dollars, and a job loss usually triggers a balloon repayment or it's treated as an early withdrawal. Build an emergency fund instead so a 401(k) loan never becomes the only option.
When can I withdraw from my 401(k) without penalty?
Generally at age 59½. There are exceptions: separation from service in or after the year you turn 55 ("rule of 55"), substantially equal periodic payments (SEPP / Rule 72(t)), and certain hardships. Withdrawals before 59½ without an exception incur a 10% penalty plus ordinary income tax.
What is the difference between a 401(k) and a 403(b)?
A 403(b) is the equivalent plan for employees of public schools, certain non-profits, and some religious organizations. The contribution limits and tax treatment are very similar; investment options in older 403(b) plans were historically narrower (often annuity-only), though modern plans typically offer mutual funds.