401k Calculator

What a 401(k) Is

A 401(k) is an employer-sponsored retirement savings plan that lets you contribute pre-tax dollars from your paycheck. Your contributions grow tax-deferred — you pay no income tax on the money or its investment gains until you withdraw it in retirement. Many employers also offer a matching contribution, which is essentially free money added to your account.

How the Calculator Works

Enter your current age, planned retirement age, current 401(k) balance, annual contribution, expected employer match, and estimated annual return. The calculator compounds your balance year over year, showing how much you will have at retirement. It applies the match percentage to your contribution (up to the match limit) and compounds the total at your expected rate of return.

The Power of Employer Match

If your employer matches 50% of contributions up to 6% of salary, and you earn $75,000, contributing 6% ($4,500/year) gets you an additional $2,250 from your employer — a 50% instant return on that money before any investment growth. Not contributing enough to capture the full match is literally leaving compensation on the table.

Contribution Limits

For 2025, the IRS sets the employee contribution limit at $23,500 for those under 50, with a $7,500 catch-up provision for those 50 and older (total: $31,000). The combined employer + employee limit is $70,000. These limits are indexed to inflation and increase periodically. Maximizing contributions, especially early in your career, has an outsized impact due to decades of compounding.

Investment Return Assumptions

A commonly used long-term return estimate for a balanced portfolio is 7-8% annually (after inflation, the historical stock market average is about 7%). Conservative investors might assume 5-6%, while aggressive portfolios might project 8-10%. The calculator lets you model different scenarios. Remember that returns are not guaranteed and will vary year to year — the projection shows the long-term trajectory, not year-by-year performance.

Traditional vs Roth 401(k)

A traditional 401(k) reduces your taxable income now (you pay taxes on withdrawals in retirement). A Roth 401(k) uses after-tax dollars (contributions are not deductible, but withdrawals in retirement are tax-free). The better choice depends on whether you expect to be in a higher or lower tax bracket in retirement. Many advisors recommend having both types for tax diversification.

Authoritative Sources

This calculator uses formulas and reference data drawn from the following sources:

- Federal Reserve — Economic Data - SEC — Compound Interest Calculator - SEC — Investor.gov

This 401k calculator uses standard investing formulas to compute results. Enter your values and the formula is applied automatically — all math is handled for you. The calculation follows industry-standard methodology.

• https://www.sec.gov
• https://www.investor.gov