401k Calculator

What Is a 401(k)

A 401(k) is a retirement savings account sponsored by your employer. It allows you to automatically invest part of your paycheck into a tax-advantaged investment account, helping you grow your savings for retirement. Depending on your plan, you can choose to make Traditional or Roth contributions—or a combination of both.

The two most common types are:

• Traditional 401(k): Contributions are made before taxes, reducing your taxable income today. You’ll pay taxes when you withdraw the money in retirement.
• Roth 401(k): Contributions are made after taxes, meaning you pay taxes now but enjoy tax-free withdrawals later, including on investment gains.

One of the biggest perks of a 401(k) is the employer match—free money that your company contributes based on how much you save. A 401k calculator with match can show you how quickly these contributions add up over time.

How Employer Matching Works in a 401(k)

Most employers offer a matching program to encourage you to save for retirement. A typical match might be 50% of the first 6% of your salary. This means if you contribute 6% of your paycheck, your company adds another 3%.

Example:

• Jane earns $70,000 annually.
• She contributes 6% of her salary = $4,200 per year.
• Her employer matches 50% of the first 6%, adding $2,100 per year.
• Total annual contribution = $6,300.

If Jane uses a 401k calculator employer match tool, she’ll see how this free money accelerates her retirement savings, especially when combined with compound growth.

In 2025, the IRS allows you to contribute up to $23,000 if you’re under 50, or $30,500 if you’re 50 or older. Employer match is on top of this limit.

Roth vs Traditional 401(k): Which One Should You Choose?

The choice between Roth and Traditional 401(k) depends on your current tax bracket and your expectations for retirement.

• Traditional 401(k): Best if you want to reduce your taxable income now, especially if you’re in a high tax bracket.
• Roth 401(k): Ideal if you’re in a lower tax bracket today or expect higher taxes in retirement, since withdrawals are tax-free.

For many people, a combination of both can be a smart approach. Using a 401k calculator Roth vs Traditional can help visualize which option might grow your retirement savings more effectively based on your salary and tax rate.

Real Life Example: How Small Contributions Grow Big

Let’s see how saving early and consistently pays off with an example.

Mark, age 28, earns $60,000 per year and contributes 10% of his salary. His employer matches 100% of the first 4%. His expected annual return on investment is 7%.

• Mark’s annual contribution: $6,000.
• Employer match: $2,400 per year.
• Total annual contribution: $8,400.

By using a 401k calculator with match, Mark finds that by age 65, his balance could reach over $1.3 million. Starting early and getting the full employer match can make a massive difference.

If Mark had started at age 38 instead, his balance at 65 would shrink to around $600,000—almost half the amount.

The Cost of Early Withdrawals

One of the most common mistakes people make is cashing out their 401(k) early. Withdrawing funds before age 59½ typically results in a 10% early withdrawal penalty, plus income taxes on the amount withdrawn.

For example, if you take out $20,000 early, you could lose around $6,000 to penalties and taxes, leaving you with just $14,000. Using a 401k calculator early withdrawal helps you see exactly how much you lose to penalties and taxes.

Exceptions apply for hardship withdrawals or specific circumstances, but most financial advisors recommend leaving your 401(k) untouched until retirement.

How Much Should You Contribute to a 401(k)?

There’s no one-size-fits-all answer, but here are some good practices:

• Always contribute enough to get the full employer match—it’s free money.
• Aim for at least 10-15% of your salary, including employer match.
• Increase your contribution by 1% annually or whenever you get a raise.
• Max out your contributions if possible ($23,000 or $30,500 if age 50+ in 2025).

A 401k or Roth 401k calculator can help you test different contribution levels and see how small changes impact your total retirement savings.

Frequently Asked Questions About 401(k)

How is a 401(k) employer match calculated?

Employer match is based on your contributions. For example, a 50% match on the first 6% of your salary means if you contribute 6%, your employer contributes an additional 3%. A 401k calculator with match helps you figure out how much free money you’re getting each year.

What happens if I withdraw from my 401(k) before retirement?

Early withdrawals before age 59½ usually come with a 10% penalty and income tax. Some exceptions exist, like for certain hardships. Using a 401k calculator early withdrawal will show you the net amount you’d receive after penalties and taxes.

Is it better to choose Roth or Traditional 401(k)?

It depends on your tax situation. Roth is usually better if you expect to be in a higher tax bracket in retirement. Traditional is preferred if you want to lower your taxes now. Many calculators offer a Roth vs Traditional comparison to help you decide.

Can I have both Roth and Traditional 401(k) accounts?

Yes, many employers allow you to split contributions between Roth and Traditional. You can contribute part of your salary pre-tax and part after-tax to diversify your tax exposure in retirement.

How much do I need to contribute to retire with $1 million?

It depends on your age, salary, and investment returns. As a rule of thumb, saving 15% of your salary starting in your 20s can get you there. A 401k calculator with match shows you if you’re on track.

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

You can leave it in your old employer’s plan, roll it over to a new 401(k), or transfer it to an IRA. Rolling over helps you avoid taxes and penalties while keeping your retirement savings growing.