401k Calculator
Calculate how your 401k contributions will grow and see the power of employer matching.
401k Growth Formulas
Understanding Your 401k
A 401(k) is one of the most powerful tools for building retirement wealth. This employer-sponsored plan allows you to save pre-tax dollars, reducing your current tax bill while your investments grow tax-deferred until retirement.
The true power of a 401(k) comes from three sources: tax advantages, employer matching contributions, and the magic of compound growth over decades.
Tax-Deferred Growth
Your investments grow without annual taxes on gains.
Employer Match
Free money from your employer—instant 50-100% return.
Compound Growth
Time turns small contributions into substantial wealth.
Automatic Savings
Contributions happen before you can spend the money.
How 401k Matching Works
Employer matching is essentially free money added to your retirement savings. Understanding your company's matching formula helps you maximize this benefit.
Common Match Formula
Many employers match 50% of contributions up to 6% of salary. If you earn $75,000 and contribute 6% ($4,500), your employer adds $2,250.
Dollar-for-Dollar Match
Some employers match 100% up to a limit. Contributing 4% might get you 4% from your employer—doubling your savings instantly.
Vesting Schedule
Employer matches often vest over 3-6 years. You may not keep the full match if you leave early.
Always Get the Full Match
At minimum, contribute enough to get your full employer match. Anything less is leaving free money on the table.
2024 401k Contribution Limits
The IRS sets annual limits on 401k contributions. Understanding these limits helps you maximize your tax-advantaged savings.
| Limit Type | Under 50 | Age 50+ | Notes |
|---|---|---|---|
| Employee Contribution | $23,000 | $30,500 | Your pre-tax/Roth contributions |
| Total Limit (with employer) | $69,000 | $76,500 | Includes employer match |
| Catch-Up (50+) | N/A | $7,500 | Extra allowed after age 50 |
| Percentage Cap | 100% | 100% | Of compensation (some limits apply) |
Traditional vs Roth 401k
Many employers now offer both traditional and Roth 401k options. Each has different tax implications that affect your long-term wealth.
Traditional 401k
Contributions reduce your taxable income today. You pay ordinary income tax on withdrawals in retirement. Best if you expect to be in a lower tax bracket in retirement.
Roth 401k
Contributions are after-tax (no immediate tax break). Withdrawals in retirement are completely tax-free, including all growth. Best if you expect higher taxes in retirement.
Splitting Contributions
Many people split between traditional and Roth to hedge against future tax uncertainty. This provides tax diversification in retirement.
Employer Match
Important: Even if you choose Roth contributions, your employer's matching contributions always go into a traditional (pre-tax) account.
Maximizing Your 401k
Strategic decisions can significantly boost your 401k balance over time. Here are the most impactful moves.
Get the Full Match First
Before doing anything else, contribute enough to get your full employer match. A 50% match is an instant 50% return—no investment can beat that.
Increase Annually
Commit to increasing your contribution rate by 1% each year, especially with raises. You won't miss the money and your future self will thank you.
Max Out If Possible
If you can afford it, try to reach the $23,000 annual limit (2024). High earners should definitely aim for this to maximize tax-advantaged growth.
Use Catch-Up Contributions
After age 50, you can contribute an extra $7,500 annually. Use these catch-up contributions to accelerate savings in your peak earning years.
Choose Low-Cost Funds
Within your 401k options, choose low-cost index funds when available. A 1% fee difference costs tens of thousands over a career.
Rebalance Annually
Review your allocation once a year and rebalance if needed. Many plans offer automatic rebalancing or target-date funds that do this for you.
Common 401k Mistakes to Avoid
Avoiding these common errors can add hundreds of thousands to your retirement savings.
Not Contributing Enough for Match
The biggest mistake is not contributing enough to get your full employer match. You're literally declining free money that compounds for decades.
Cashing Out When Leaving Jobs
Early withdrawal triggers income tax plus a 10% penalty, and destroys years of compound growth. Roll over to an IRA or new employer's plan instead.
Panic Selling in Downturns
Market crashes are painful but temporary. Selling locks in losses. Those who stayed invested through 2008-2009 recovered and thrived.
Taking Loans from 401k
401k loans seem convenient but remove money from compounding growth. If you leave your job, the loan often becomes due immediately.
Ignoring Investment Options
Many people never look at their 401k investments after enrolling. Review your options—high-fee funds or overly conservative allocations hurt returns.
Waiting to Start
Every year you delay costs you significantly in compound growth. Starting at 25 vs 35 with the same contributions can mean double the final balance.
Frequently Asked Questions
How much should I contribute to my 401k?
At minimum, contribute enough to get your full employer match. Ideally, aim for 10-15% of your salary including employer match. If you can afford more, maxing out at $23,000 (2024) provides maximum tax-advantaged growth.
Should I choose traditional or Roth 401k?
Choose Roth if you're early in your career (lower tax bracket now), expect higher income later, or want tax-free retirement income. Choose traditional if you're in peak earning years and expect lower taxes in retirement. Many people split contributions for tax diversification.
What happens to my 401k if I change jobs?
You have several options: leave it with your old employer (if allowed), roll it to your new employer's plan, or roll it to an IRA. Rolling to an IRA often provides more investment choices and lower fees. Never cash it out—you'll lose 30-40% to taxes and penalties.
Can I withdraw from my 401k before retirement?
You can, but early withdrawals (before 59½) trigger ordinary income tax plus a 10% penalty. Exceptions exist for hardship, disability, or leaving your job after age 55. Generally, avoid early withdrawals—the compound growth you lose is substantial.
What's better: 401k or IRA?
Prioritize 401k first if you have an employer match—get the free money. After that, IRAs offer more investment choices and often lower fees. Max out your employer match, then consider maxing an IRA ($7,000 in 2024), then return to your 401k.
How is employer vesting calculated?
Vesting determines how much of the employer match you keep if you leave. Common schedules are 3-year cliff (0% then 100%) or 6-year graded (20% per year). Your own contributions are always 100% vested.
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