401(k) Calculator

Estimate your retirement savings with our 401(k) calculator. See how your contributions, employer match, and investment returns can grow over time to help you reach your retirement goals.

Understanding Your 401(k)

A 401(k) is a tax-advantaged retirement savings plan offered by employers that allows employees to save and invest a portion of their paycheck before taxes are taken out. These plans are an essential tool for building long-term wealth and securing your financial future.

Employer Matching: Many employers offer matching contributions as an incentive for employees to participate in their 401(k) plan. This is essentially free money that can significantly boost your retirement savings. Our calculator factors in both the match percentage and the match limit to give you an accurate projection.

Compound Growth: One of the most powerful aspects of a 401(k) is the potential for compound growth over time. By starting early and contributing consistently, your investments have more time to grow, potentially resulting in a substantially larger nest egg by retirement.

Tax Benefits: Traditional 401(k) contributions are made with pre-tax dollars, reducing your taxable income for the year. Your investments then grow tax-deferred until withdrawal during retirement, when you may be in a lower tax bracket.

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

Financial experts generally recommend contributing at least enough to get your full employer match (often 3-6% of your salary). Ideally, aim to save 10-15% of your income for retirement, including your employer's match. If you can't start there, begin with what you can afford and gradually increase your contributions, especially with salary raises.

What is the maximum 401(k) contribution limit?

The IRS sets annual contribution limits for 401(k) plans. For 2023, the employee contribution limit is $22,500, with an additional $7,500 catch-up contribution allowed for those age 50 and older. These limits are periodically adjusted for inflation. Note that employer contributions don't count toward your personal contribution limit.

How is a 401(k) different from an IRA?

While both are retirement accounts with tax advantages, 401(k) plans are employer-sponsored with higher contribution limits, potential employer matching, and limited investment options. IRAs (Individual Retirement Accounts) are opened independently with lower contribution limits but typically offer more investment choices. Many people use both account types to maximize their retirement savings.

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

When changing jobs, you typically have four options for your 401(k): leave it with your former employer (if allowed), roll it over to your new employer's plan, roll it over to an IRA, or cash it out (not recommended due to taxes and penalties). Rolling over to an IRA or new employer plan is often the best choice to maintain tax advantages and investment growth.

When can I withdraw from my 401(k)?

You can begin taking penalty-free withdrawals from your 401(k) at age 59½. Withdrawals before this age generally incur a 10% early withdrawal penalty plus income taxes, though certain exceptions exist for hardships. At age 72 (or 73 depending on your birth year), you must begin taking required minimum distributions (RMDs) from traditional 401(k) accounts.

How is a 401(k) taxed?

Traditional 401(k) contributions are made with pre-tax dollars, reducing your current taxable income. The money grows tax-deferred until withdrawal in retirement, when it is taxed as ordinary income. Roth 401(k) contributions, if your plan offers them, are made with after-tax dollars but grow tax-free and can be withdrawn tax-free in retirement if certain conditions are met.

Pros and Cons of a 401(k)

Advantages

• Employer Matching: Free money that boosts your retirement savings
• Tax Advantages: Pre-tax contributions and tax-deferred growth
• Higher Contribution Limits: Compared to IRAs and other retirement accounts
• Automatic Contributions: Payroll deductions make saving consistent and easy
• Creditor Protection: 401(k) assets generally have strong legal protections

Disadvantages

• Limited Investment Options: Fewer choices compared to IRAs or brokerage accounts
• Early Withdrawal Penalties: 10% penalty plus taxes for withdrawals before age 59½
• Required Minimum Distributions: Mandatory withdrawals starting at age 72/73
• Administrative Fees: May be higher than other retirement account options
• Less Flexibility: Contribution and withdrawal rules are more restrictive

Tips for Maximizing Your 401(k)

• Always get the full employer match - It's essentially free money
• Start early - Time is your greatest asset for compound growth
• Increase contributions gradually - Boost your percentage with each raise
• Diversify your investments - Balance risk appropriate to your age and goals
• Consider a Roth option - If available, for tax diversification
• Avoid early withdrawals - Preserve your retirement savings whenever possible
• Review regularly - Adjust your strategy as your life circumstances change