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401(k) Calculator

Projected Balance at Retirement: $1,211,657.39
Your Total Contributions: $224,975.15
Employer Total Contributions: $112,487.57
Total Investment Growth: $874,194.67
Current Balance: $0.00 Annual Salary (Year 1): $75,000.00 Employee Contribution: 6.0% × $75,000.00 = $4,500.00/yr Employer Match: 50% of employee contrib up to 6.0% of salary = $2,250.00/yr (Year 1) Expected Return: 7% per year Salary Increase: 2% per year Each year: Balance = Balance × (1 + 0.070) + Employee + Employer Contributions Years to retirement: 35 Projected Balance at Age 65: $1,211,657.39
401(k) Balance Growth
Balance Milestones (Every 5 Years)
AgeBalanceYour ContributionsEmployer Contributions
35$41,680.00$23,418.18$11,709.09
40$104,476.44$49,273.74$24,636.87
45$197,341.30$77,820.38$38,910.19
50$332,877.17$109,338.16$54,669.08
55$528,811.73$144,136.35$72,068.17
60$810,066.26$182,556.36$91,278.18
65$1,211,657.39$224,975.15$112,487.57
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What Is a 401(k)?

A 401(k) is an employer-sponsored retirement savings plan that lets you invest a portion of your paycheck before taxes are taken out. The name comes directly from the section of the Internal Revenue Code that created it. With a Traditional 401(k), contributions reduce your taxable income today — you pay tax only when you withdraw the money in retirement. With a Roth 401(k), you contribute after-tax dollars but qualified withdrawals in retirement are completely tax-free.

The 401(k) is the most common retirement savings vehicle for American workers, with over $7 trillion in assets across more than 600,000 plans. Its power comes from three sources working together: tax-advantaged compounding, employer matching contributions, and automatic payroll deductions that make saving effortless.

2025 401(k) Contribution Limits

Limit Type Amount (2025) Notes
Employee Elective Deferrals $23,500 Under age 50
Catch-Up Contribution +$7,500 Age 50 and older (total: $31,000)
Super Catch-Up (ages 60-63) +$11,250 SECURE 2.0 Act provision (total: $34,750)
Total Additions (employee + employer) $70,000 Or 100% of compensation if less

These limits are adjusted annually for inflation. The employee elective deferral limit increased from $22,500 in 2023 to $23,000 in 2024 to $23,500 in 2025. Contribution limits are per person, not per account — if you have multiple 401(k) accounts (from different jobs), the total across all accounts cannot exceed the annual limit.

How Employer Matching Works

Employer matching is the single most powerful feature of a 401(k). When your employer matches your contributions, you receive free money that immediately begins compounding. The most common matching formulas in the US are:

Formula Example ($75,000 salary, 6% contributed) Annual Match
50% of first 6% 50% × $4,500 $2,250
100% of first 3% 100% × $2,250 $2,250
100% of first 4% 100% × $3,000 $3,000
100% of first 6% 100% × $4,500 $4,500

The golden rule: always contribute at least enough to capture the full employer match. If your employer matches 50 cents on every dollar up to 6% of your salary, not contributing 6% means leaving a guaranteed 3% of your salary on the table every year. Over 35 years, that missed $2,250/year at 7% growth is worth over $330,000.

How the 401(k) Growth Formula Works

Your 401(k) balance grows through three streams: your contributions, employer contributions, and investment returns on both. Each year the calculation works as follows:

New Balance = Previous Balance × (1 + Return%) + Employee Contribution + Employer Match Example (Year 1): Previous Balance: $0 Annual Return: 7% Employee Contrib: $75,000 × 6% = $4,500 Employer Match: $4,500 × 50% = $2,250 (50% match on 6%) New Balance: $0 × 1.07 + $4,500 + $2,250 = $6,750 Example (Year 10, salary grown to ~$91,000): Previous Balance: ~$74,000 Annual Return: 7% Employee Contrib: ~$5,460 Employer Match: ~$2,730 New Balance: ~$74,000 × 1.07 + $5,460 + $2,730 ≈ $87,380

Salary growth matters significantly over long timelines. If your salary increases by 2% annually, your contributions also increase by 2%, compounding both the base and the growth rate of contributions. Our calculator accounts for this annual salary escalation.

Traditional vs. Roth 401(k): Which to Choose?

Both Traditional and Roth 401(k) plans have the same contribution limits and the same investment options. The only difference is when you pay taxes.

Feature Traditional 401(k) Roth 401(k)
Contributions Pre-tax (reduces taxable income now) After-tax (no deduction now)
Investment growth Tax-deferred Tax-free
Withdrawals in retirement Taxed as ordinary income Tax-free (if qualified)
Required Minimum Distributions Yes, starting at age 73 No (starting 2024, per SECURE 2.0)
Best for High earners expecting lower income in retirement Younger workers in low tax brackets

The general advice: if you expect to be in a higher tax bracket in retirement than you are today, choose Roth. If you expect to be in a lower bracket in retirement, choose Traditional. Most people have lower taxable income in retirement, making Traditional the default choice — but the Roth's tax-free growth and no RMD requirement are compelling for younger investors.

Frequently Asked Questions

What is the 401(k) contribution limit for 2025?

For 2025, the IRS 401(k) employee contribution limit is $23,500. If you are age 50 or older, you can make an additional catch-up contribution of $7,500, bringing your total to $31,000. The combined employee + employer limit (total additions) is $70,000 for 2025.

How does employer 401(k) matching work?

Employer matching is free money added to your 401(k) based on your own contributions. The most common formula is "50% match on the first 6% of salary" — meaning if you earn $75,000 and contribute 6% ($4,500), your employer adds 50% of that: $2,250. Always contribute at least enough to get the full employer match — it is an immediate 50–100% return on that portion of your investment.

What is a good annual return assumption for a 401(k)?

The S&P 500 has returned approximately 10% annually before inflation (roughly 7% after inflation) over long periods. For a diversified 401(k) with a mix of stocks and bonds, 6–8% is a commonly used projection. More conservative portfolios (heavy bonds) might assume 4–5%. Our calculator defaults to 7%, which is a reasonable middle ground for long-term planning.

What is the difference between a Traditional and Roth 401(k)?

Traditional 401(k) contributions are pre-tax: they reduce your taxable income today, and you pay income tax when you withdraw in retirement. Roth 401(k) contributions are after-tax: no deduction now, but qualified withdrawals in retirement are completely tax-free. The same contribution limits apply to both. High earners often prefer Traditional 401(k) now; younger workers in low brackets often benefit more from Roth.

When can I withdraw from my 401(k) without penalty?

You can make penalty-free withdrawals starting at age 59½. Early withdrawals (before 59½) are subject to a 10% penalty plus ordinary income tax, with limited exceptions (disability, substantially equal periodic payments, separation from service at age 55+). Required Minimum Distributions (RMDs) must begin at age 73 under current law.

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