401(k) Calculator

Estimate your retirement savings and maximize employer matching contributions

401(k) Savings Calculator

See how your 401(k) contributions can grow over time and how employer matching can boost your retirement savings.

Your Information

Current 401(k) Details

Maximum percentage of your salary that your employer will match

Investment Assumptions

401(k) Calculation Results

Estimated 401(k) Balance at Retirement: $0.00
Inflation-Adjusted Value: $0.00
Your Total Contributions: $0.00
Employer Total Contributions: $0.00
Total Investment Earnings: $0.00
Total Fees Paid: $0.00

Understanding 401(k) Plans

What is a 401(k) Plan?

A 401(k) is a tax-advantaged retirement savings plan offered by employers. It allows employees to contribute a portion of their wages to individual accounts. The name "401(k)" comes from the section of the Internal Revenue Code that established these plans.

There are two main types of 401(k) plans:

  • Traditional 401(k): Contributions are made with pre-tax dollars, reducing your current taxable income. Withdrawals in retirement are taxed as ordinary income.
  • Roth 401(k): Contributions are made with after-tax dollars. Qualified withdrawals in retirement are tax-free, including any investment earnings.

Key Benefits of 401(k) Plans

Tax Advantages

One of the biggest benefits of a 401(k) plan is its tax-advantaged status:

  • With a traditional 401(k), your contributions reduce your current taxable income, potentially lowering your tax bill today
  • Investment growth is tax-deferred, meaning you don't pay taxes on capital gains, dividends, or interest while the money remains in the account
  • With a Roth 401(k), qualified withdrawals are completely tax-free, potentially saving you money if you expect to be in a higher tax bracket in retirement

Employer Matching

Many employers offer matching contributions as part of their 401(k) plans. This is essentially free money for your retirement:

  • A common matching formula is 50% or 100% of your contributions up to a certain percentage of your salary (typically 3-6%)
  • For example, if your employer offers a 100% match up to 4% of your salary, and you earn $60,000 per year, your employer will contribute up to $2,400 annually if you contribute at least that amount
  • Not taking full advantage of your employer's match is like leaving free money on the table

Higher Contribution Limits

401(k) plans allow for higher contribution limits compared to IRAs:

  • For 2023, employees can contribute up to $22,500 to their 401(k) plans
  • Those age 50 and older can make additional "catch-up" contributions of up to $7,500
  • These limits are significantly higher than the $6,500 limit (plus $1,000 catch-up) for IRAs

Making the Most of Your 401(k)

Start Early

The power of compound growth means that even small contributions can grow significantly over time. Starting early gives your investments more time to grow and can significantly increase your retirement savings:

  • If you contribute $5,000 per year starting at age 25, with a 7% annual return, you would have about $1,068,000 by age 65
  • If you wait until age 35 to start the same contribution schedule, you would have about $505,000 by age 65—less than half as much

Maximize Employer Match

At a minimum, try to contribute enough to your 401(k) to get the full employer match. Not capturing the full match is essentially turning down free money:

  • If your employer matches 50% of your contributions up to 6% of your salary, aim to contribute at least 6%
  • This employer match provides an immediate 50% return on your investment before any market returns

Increase Contributions Over Time

Consider gradually increasing your contribution percentage, especially as your income grows:

  • Some plans offer an "auto-escalation" feature that automatically increases your contribution percentage each year
  • Try increasing your contribution rate when you receive a raise, before you adjust to the higher income
  • Even small increases (1% per year) can significantly impact your retirement savings over time

Be Mindful of Fees

Investment fees can significantly reduce your long-term returns. Review the fees associated with your investment options:

  • Look for funds with lower expense ratios, typically index funds
  • A difference of just 1% in annual fees can reduce your final balance by 20% or more over a 30-year period
  • Pay attention to both expense ratios and any administrative fees charged by the plan

Consider Your Asset Allocation

Your investment strategy should align with your risk tolerance and time horizon:

  • Generally, younger investors can afford to take on more risk with a higher allocation to stocks
  • As you approach retirement, gradually shift to a more conservative asset allocation
  • Many 401(k) plans offer target-date funds that automatically adjust your asset allocation based on your expected retirement date

Using Our 401(k) Calculator

Our 401(k) calculator helps you estimate how your retirement savings may grow over time. By adjusting variables like contribution rate, employer match, expected rate of return, and time horizon, you can see how different scenarios might affect your retirement savings.

Remember that the results are projections based on the information you provide and consistent returns. Actual investment performance will vary, and the calculator doesn't account for market volatility or changing contribution rates over time.

Use this tool as a starting point for your retirement planning, and consider consulting with a financial advisor for personalized advice about your specific situation.

Frequently Asked Questions About 401(k) Plans

How much should I contribute to my 401(k)?

As a general guideline, financial experts recommend saving 10-15% of your gross income for retirement, including employer contributions. At a minimum, try to contribute enough to capture your full employer match—that's essentially free money. If you can't immediately reach the 10-15% target, start with what you can afford and gradually increase your contribution rate over time.

Consider these milestones:

  • Minimum: Contribute enough to get the full employer match
  • Good: Save 10-15% of your income (including employer match)
  • Better: Max out your 401(k) contribution if financially feasible

Remember that your optimal contribution rate depends on factors like your age, retirement goals, other sources of retirement income, and overall financial situation.

Should I choose a traditional or Roth 401(k)?

The choice between traditional and Roth 401(k) depends on your current tax situation and expectations for retirement:

  • Traditional 401(k): May be better if you expect to be in a lower tax bracket in retirement than you are now. You'll get tax benefits now when your tax rate is higher.
  • Roth 401(k): May be better if you expect to be in a similar or higher tax bracket in retirement. You'll pay taxes now but enjoy tax-free withdrawals later when your tax rate might be higher.

Many financial advisors recommend having both types of accounts for "tax diversification." This gives you flexibility in retirement to choose which accounts to withdraw from based on your tax situation each year. If your employer offers both options, consider splitting your contributions between traditional and Roth accounts.

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

When you leave your job, you have several options for your 401(k):

  • Leave it with your former employer: If the plan has good investment options and low fees, and your balance exceeds $5,000, you can typically leave your money in the plan.
  • Roll it over to your new employer's plan: Many employer plans accept rollovers from previous 401(k)s, which can help you consolidate your retirement savings.
  • Roll it over to an IRA: This gives you more investment options and potentially lower fees, depending on the IRA provider you choose.
  • Cash it out: This is generally the least advisable option. You'll pay income taxes plus a 10% early withdrawal penalty if you're under 59½, and you'll lose the potential future growth of those retirement funds.

A direct rollover (where the money goes directly from one retirement account to another) is usually the best approach to avoid taxes and penalties, and to keep your retirement savings growing.

When can I withdraw from my 401(k)?

Generally, you can begin taking penalty-free withdrawals from your 401(k) at age 59½. Withdrawals before that age typically incur a 10% early withdrawal penalty in addition to income taxes, although there are some exceptions for hardship withdrawals or if you leave your job at age 55 or older.

Required Minimum Distributions (RMDs) begin at age 73 (for those born between 1951 and 1959) or age 75 (for those born in 1960 or later) for traditional 401(k)s. This means you must withdraw a minimum amount each year based on your account balance and life expectancy.

Roth 401(k)s are also subject to RMDs, unlike Roth IRAs. However, you can avoid RMDs on Roth 401(k) funds by rolling them over to a Roth IRA.

Some plans allow for loans from your 401(k) or hardship withdrawals under specific circumstances, but these options should generally be considered as a last resort.

How should I invest my 401(k)?

Your 401(k) investment strategy should align with your risk tolerance, time horizon, and retirement goals. Here are some general guidelines:

  • For younger investors (20s-40s): Consider a more aggressive portfolio with a higher allocation to stocks (70-90%) to maximize long-term growth potential.
  • For mid-career investors (40s-50s): A moderate allocation (60-70% stocks, 30-40% bonds) may provide a balance of growth and stability.
  • For pre-retirees (late 50s-60s): A more conservative approach (50-60% stocks, 40-50% bonds) helps protect against market downturns as you approach retirement.

Target-date funds automatically adjust your asset allocation based on your expected retirement date and can be a good option if you prefer a hands-off approach. If you're selecting individual funds, look for low-cost index funds that provide broad market exposure. Diversification across different asset classes (large-cap, small-cap, international stocks, bonds) can help manage risk.

Consider reviewing and rebalancing your investments annually to maintain your target asset allocation.