Calcuped Calculator Logo Calcuped

401k Calculator

Calculate your 401k growth, employer matching benefits, and tax savings. Optimize your contributions to maximize your retirement savings and employer match.

401k Details

$
$
%
$

2024 limit: $23,000 (under 50), $30,500 (50+)

%
%

Example: 50% match up to 6% means employer contributes 3% if you contribute 6%+

%
%

Historical market average is ~10%, conservative estimate 6-8%

401k Projection

$1,247,891
Total at Retirement
$336,000
Your Contributions
$168,000
Employer Match
Years to Retirement: 35 years
Current Contribution: 8% ($6,000/year)
Employer Match: 3% ($2,250/year)
Expected Return: 7.0%
Salary Growth: 3.0%

Annual Tax Benefits

Tax Bracket (Est.): 22%
Annual Tax Savings: $1,320
Net Cost of Contribution: $4,680

Growth Breakdown

Current Balance 2%
Your Contributions 27%
Employer Match 13%
Investment Growth 58%

401k Contribution Strategies

Get Full Match

6%
Minimum to Contribute
Your Contribution: $4,500
Employer Match: $2,250
Total Annual: $6,750

Always contribute enough to get full employer match - it's free money!

Max Contribution

30.7%
% of Salary Needed
Your Contribution: $23,000
Employer Match: $2,250
Total Annual: $25,250

Maximum tax-advantaged savings for 2024

Current Plan

8%
Current Contribution
Your Contribution: $6,000
Employer Match: $2,250
Total Annual: $8,250

Your current contribution strategy

401k Basics & Tips

How 401k Works

  • • Pre-tax contributions reduce current income taxes
  • • Money grows tax-deferred until retirement
  • • Employer matching is additional free money
  • • Withdrawals in retirement are taxed as income
  • • Early withdrawals before 59½ incur 10% penalty

Contribution Limits (2024)

Employee (under 50): $23,000
Employee (50+): $30,500
Total (employee + match): $69,000
Total (50+): $76,500

Maximizing Your 401k

  • • Always get full employer match first
  • • Increase contributions with salary raises
  • • Use automatic annual increases
  • • Consider Roth 401k for tax diversification
  • • Review and rebalance investments annually

Investment Tips

  • • Diversify across asset classes
  • • Choose low-cost index funds when possible
  • • Consider target-date funds for simplicity
  • • Avoid frequent trading and market timing
  • • Rebalance periodically to maintain allocation

Maximizing Your Employer Match: Free Money You Can't Ignore

Employer matching is the closest thing to free money in personal finance. If your employer offers a 50% match on the first 6% of salary you contribute, you're getting an instant 50% return before any market growth. Someone earning $75,000 who contributes 6% ($4,500) gets an additional $2,250 from their employer annually. That's $2,250 you wouldn't receive otherwise—no amount of savvy investing beats free money.

Over a career, employer match compounds into staggering amounts. That $2,250 annual match invested from age 30-65 at 7% returns grows to $249,000. You contributed nothing extra to get it—just claimed money your employer offered. Failing to get the full match is literally leaving money on the table that you'll never get another chance to claim. If you can only afford to contribute 3% to your 401(k), make it at least enough to max the employer match.

Understanding Different Match Formulas

Most employers match 50% of your contributions up to 6% of salary. If you earn $80,000 and contribute $4,800 (6%), they add $2,400 (50% of your $4,800). Contributing less than 6% leaves match money behind. Contributing more than 6% still only gets you $2,400 in match—the employer match caps at 6% of your contributions, not your salary.

Some employers offer dollar-for-dollar matching up to 3-4% of salary. Others use tiered formulas: 100% match on first 3%, then 50% on next 3%. A few employers contribute a fixed percentage regardless of whether you contribute (rare but amazing). Read your plan documents carefully to understand your exact match formula and optimize contributions accordingly. HR can explain it if the documents are confusing.

The Tax Advantage Multiplier

Traditional 401(k) contributions reduce taxable income, creating immediate tax savings. Someone in the 22% tax bracket contributing $10,000 saves $2,200 in federal taxes that year. Their actual out-of-pocket cost is only $7,800 ($10,000 - $2,200 tax savings). When you add employer match, the math becomes incredible. Contribute $6,000, pay only $4,680 after tax savings (22% bracket), get $3,000 employer match—you invested $4,680 and have $9,000 in your 401(k). That's a 92% instant return.

This tax benefit compounds over decades. Every dollar in traditional 401(k) grows tax-deferred—no taxes on dividends, interest, or capital gains until withdrawal in retirement. That $9,000 ($6,000 + $3,000 match) growing at 7% for 30 years becomes $68,500. You paid $4,680 out of pocket and ended with $68,500—that's 1,365% total return. No other investment vehicle offers this combination of employer match and tax deferral.

Smart Contribution Strategies at Every Career Stage

Starting Your Career (20s-Early 30s)

Early career years are financially tight with student loans, low salaries, and establishing life. But they're also your most valuable years for 401(k) contributions because time creates exponential growth. Contributing $3,000 annually from age 25-35 (just $30,000 total) grows to $388,000 by age 65 at 7% returns. Those same $30,000 contributed from age 45-55 only grows to $94,000—four times less return from the same contributions.

Start with whatever you can manage—even 3% if that's all you can afford—but set up annual automatic increases. Many plans offer auto-escalation: your contribution rate increases 1-2% annually automatically. You barely notice the gradual reduction in take-home pay as your salary increases, but your 401(k) balance accelerates dramatically. Someone starting at 3% with 1% annual increases reaches 15% contribution rate in 12 years while their salary likely doubled, making the 15% feel equivalent to what 6% felt like initially.

Mid-Career (Mid 30s-40s)

This is your power decade for wealth building. Salaries peak, expenses stabilize (kids still in school but not college yet), and you have 20-25 years for contributions to compound. Target 15-20% total retirement savings. If you're behind on retirement savings, this is when to aggressively catch up. Someone at 40 with $50,000 saved contributing $15,000 annually (15% of $100,000 salary plus raises) will have $1.4 million by 65. Start later at 45 and you need $21,000 annually to reach the same goal—50% higher contributions for 5 fewer years.

Use windfalls strategically. Bonuses, tax refunds, inheritance—putting 50-100% of unexpected money into 401(k) turbocharges savings without impacting lifestyle. A $10,000 bonus contributed at age 40 becomes $76,000 by age 65 at 7%. Better yet, increase your regular contribution percentage whenever you get a raise. Get a $5,000 raise? Increase 401(k) by $2,500 annually—you still enjoy a $2,500 lifestyle increase while banking half the raise for retirement.

Pre-Retirement (50s-60s)

At 50, catch-up contributions allow an extra $7,500 annually ($30,500 total limit in 2024). If you're behind on retirement goals, max this out. Someone contributing $30,500 annually from 50-65 (15 years) accumulates $791,000 from contributions alone at 7% returns. Kids are often out of college, mortgage might be paid off, creating capacity for aggressive saving during peak earning years.

This is also when to diversify between traditional and Roth 401(k) if available. Having both gives tax flexibility in retirement. If you expect similar or higher tax brackets in retirement, shift some contributions to Roth—pay taxes now at known rates rather than risk higher rates later. Someone contributing $23,000 might split: $15,000 traditional (immediate tax deduction) and $8,000 Roth (tax-free withdrawals later). This creates options for tax-efficient withdrawal strategies in retirement.

401(k) Planning Questions

Should I max out my 401(k) or pay off debt first?

Always contribute enough to get the full employer match first—that's an instant 50-100% return. Then prioritize high-interest debt (credit cards, personal loans above 7%). Once high-interest debt is gone, increase your 401(k) contributions while paying down remaining lower-interest debt like mortgages. The employer match is free money you can't get back if you don't claim it now. Someone with a 50% match on 6% of salary earning $75,000 gets $2,250 free annually—$78,750 over 35 years at 7% returns. Never leave that on the table, even with debt.

What percentage of my salary should I contribute to my 401(k)?

Financial experts recommend 15-20% of gross income for all retirement savings. Start with at least enough to get your full employer match (typically 3-6% of salary). If you can't do 15% immediately, start with 6%, then increase 1-2% annually until you reach 15-20%. Someone earning $75,000 contributing 6% ($4,500) plus 3% employer match ($2,250) saves $6,750 annually—$890,000 over 35 years at 7%. Increase to 15% ($11,250) plus match and you're looking at $1.48 million. Every percentage point matters enormously over decades.

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

Traditional 401(k) contributions are pre-tax (reduce current taxable income) but withdrawals are taxed in retirement. Roth 401(k) uses after-tax dollars now but withdrawals are tax-free in retirement. Choose traditional if you're in a high tax bracket now and expect lower brackets in retirement. Choose Roth if you're young, in low brackets, or expect higher brackets later. Best strategy: split contributions for tax diversification. Someone in the 24% bracket saving $23,000 with traditional saves $5,520 in current taxes. With Roth, they pay that tax now but all future growth is tax-free. For a 30-year-old, that $23,000 Roth becomes $175,000 tax-free at retirement.

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

You have four options: (1) Leave it with your old employer if the balance exceeds $5,000, (2) Roll it over to your new employer's 401(k), (3) Roll it to an IRA (gives you more investment options and typically lower fees), or (4) Cash out (bad idea—you'll pay taxes plus 10% penalty if under 59.5). Rolling to an IRA is usually best—you control investments, can choose low-cost brokerages like Vanguard or Fidelity, and consolidate multiple old 401(k)s. Never cash out unless absolutely desperate. A $30,000 401(k) cashed at age 35 costs you $10,500 in taxes/penalties and $229,000 in future growth by age 65.

Can I access my 401(k) money before retirement?

You can withdraw at 59.5 without penalties (still pay income tax). Before that, early withdrawals incur 10% penalty plus income taxes—taking $20,000 out costs you $6,000 in penalties/taxes at 22% bracket. Exceptions: hardship withdrawals for medical expenses, buying first home, or avoiding foreclosure still face taxes but no penalty. Better option: 401(k) loans let you borrow up to 50% of vested balance or $50,000 (whichever is less) and repay yourself with interest over 5 years. You avoid taxes/penalties but lose market growth on borrowed amount. Last resort only—that $20,000 loan costs you $53,000 in lost retirement growth over 30 years.

How should I invest my 401(k) funds?

For simplicity, choose a target-date fund matching your retirement year (e.g., Target 2055 if retiring in 2055). These automatically adjust from aggressive (stocks) when young to conservative (bonds) as retirement nears. For DIY investing, follow your age in bonds rule: 30 years old = 70% stocks, 30% bonds. Use low-cost index funds when available—S&P 500 index funds charge 0.03-0.15% versus 0.5-1.5% for actively managed funds. That fee difference costs you $100,000+ over a career. Rebalance annually: if stocks surge to 80% of your target 70%, sell some stocks and buy bonds. This forces buying low and selling high.

What is vesting and why does it matter?

Vesting determines how much of your employer match you keep if you leave. Your contributions always belong to you 100%. Employer contributions may vest immediately (you keep it all), graded (20% per year over 5 years), or cliff (0% until year 3, then 100%). If you have $50,000 in your 401(k)—$35,000 yours, $15,000 employer match—and leave with 60% vesting, you keep your $35,000 plus $9,000 of the match, forfeiting $6,000. Check your vesting schedule before changing jobs. Sometimes staying a few extra months to hit full vesting is worth tens of thousands of dollars.

Should I take a 401(k) loan to buy a house?

Generally no. You're borrowing from your future self and missing market returns during repayment. A $30,000 loan repaid over 5 years at 5% costs you about $3,975 in interest paid to yourself—but you miss market returns (historically 10%) on that $30,000, costing $17,000 in opportunity cost. Plus, if you lose your job, most plans require full repayment within 60 days or it becomes a taxable distribution with penalties. Better options: save in a regular account for down payment, use first-time homebuyer programs requiring less down payment, or take a smaller down payment and pay PMI temporarily. Raid retirement savings as absolute last resort only.

What are catch-up contributions and when can I make them?

Starting at age 50, you can contribute an extra $7,500 annually on top of the $23,000 standard limit (total $30,500 for 2024). This helps people who started saving late or want to maximize retirement savings during peak earning years. Someone contributing $30,500 annually from age 50-67 (17 years) at 7% returns accumulates $1.01 million just from those contributions. Without catch-ups at $23,000 annually, they'd have only $759,000—a $251,000 difference. If you're over 50 and can afford it, maximize catch-up contributions. Your 50s and early 60s are your last chance to aggressively fund retirement before you need to tap it.

How much will my 401(k) be worth at retirement?

It depends on contributions, employer match, returns, and years invested. Example: 30-year-old earning $75,000, contributing 10% ($7,500) with 3% match ($2,250), 3% annual salary increases, 7% investment returns, retiring at 65. Result: $1.63 million. If they start at 40 instead, with the same inputs: $745,000—less than half because they lost 10 years of compound growth. If they contribute 15% instead of 10%: $2.06 million. If returns are 8% instead of 7%: $1.95 million. Use our calculator to model your specific situation with your actual numbers. Small changes in contribution rate and starting age create massive differences in ending balance.

What happens to my 401(k) when I retire?

At retirement (typically 65), you have several options: (1) Leave it in your 401(k) and take withdrawals as needed, (2) Roll it to an IRA for more investment control and flexibility, (3) Convert to an annuity for guaranteed lifetime income, or (4) Take lump-sum distributions (rarely smart—huge tax bill). Most people roll to an IRA. At 73, you must start Required Minimum Distributions (RMDs)—IRS forces you to withdraw and pay taxes based on your life expectancy. Someone with $1 million at 73 must withdraw about $37,000 first year (3.7%), increasing percentages as they age. Roth 401(k)s don't have RMDs during your lifetime.

What's the difference between 401(k) contribution limits and deduction limits?

For 2024, you can contribute up to $23,000 to your 401(k) if under 50 ($30,500 if 50+). This is your limit, not your employer's. The total contribution limit including employer match is $69,000 ($76,500 if 50+). Traditional 401(k) contributions are always deductible—they reduce your taxable income dollar-for-dollar with no income limits. This is different from IRAs which have income limits on deductibility. Someone earning $200,000 contributing $23,000 to traditional 401(k) pays taxes on only $177,000, saving $5,520 at 24% bracket. High earners can't deduct traditional IRA contributions but can always deduct 401(k) contributions regardless of income.

Important 401k Rules

Vesting Schedules

Vesting determines how much of your employer match you keep if you leave:

Immediate Vesting

You keep 100% of employer contributions immediately

Graded Vesting

Gradual vesting over 2-6 years (e.g., 20% per year)

Cliff Vesting

0% until a certain date, then 100% (typically 3 years)

Required Distributions

Age 59½

Can withdraw without 10% early withdrawal penalty (still pay income tax)

Age 73

Must start taking Required Minimum Distributions (RMDs)

Hardship Withdrawals

Limited situations allow early access with penalties

401k Loans

Borrow up to 50% of balance or $50,000 (must repay within 5 years)

Related Calculators

Retirement Calculator

Plan your overall retirement savings

Investment Calculator

Calculate investment returns and growth

Compound Interest

Calculate compound interest growth