401k Calculator

How Does a 401(k) Grow Over Time?

A 401(k) grows through three channels: your contributions, employer matching contributions, and investment returns on the growing balance. Enter your current balance, annual contribution, employer match percentage, salary, expected return, and years until retirement in the calculator above. It projects the total balance at retirement, breaks down how much came from your deposits versus employer match versus market growth, and estimates monthly retirement income using the 4% withdrawal guideline.

Contribution Limits and Maximizing Your 401(k)

The 2025 annual contribution limit is $23,500 for workers under 50. Workers aged 50 and older can add a $7,500 catch-up contribution for a $31,000 total. A new "super catch-up" provision allows workers aged 60-63 to contribute up to $34,750. These limits apply to employee contributions only - employer match does not count toward the employee cap. The combined employee plus employer limit is $70,000 (or $77,500 with catch-up). Contributing the full $23,500 on a $90,000 salary means roughly $904 per biweekly paycheck, which reduces taxable income by $23,500 and saves approximately $5,200-$7,000 in federal taxes for someone in the 22-24% bracket.

Employer Match: Never Leave Free Money Behind

A common match formula is 50% of contributions up to 6% of salary. On an $80,000 salary, contributing 6% ($4,800/year) earns a $2,400 employer match. Contributing only 3% ($2,400) earns just $1,200 in match - leaving $1,200 on the table. Over 30 years at 7% return, that forfeited $1,200/year grows into approximately $113,000 of missed wealth. Some employers match dollar-for-dollar up to 3-4%, which is even more generous. Always contribute at least enough to capture the full employer match before directing savings anywhere else. It is an immediate 50-100% return on your money with zero risk.

Investment Options Inside a 401(k)

Most 401(k) plans offer a menu of mutual funds spanning several categories: US large-cap stock funds, US small-cap funds, international stock funds, bond funds, and a stable value or money market fund. Target-date funds (labeled by retirement year, like "Target 2055") automatically shift from stocks toward bonds as your retirement approaches. These are a solid single-fund choice for investors who prefer simplicity. For those comfortable choosing, a common allocation for workers in their 20s-30s is 80-90% stocks and 10-20% bonds, gradually shifting to 60/40 by the decade before retirement.

Traditional 401(k) vs Roth 401(k): Tax Math

Traditional 401(k) contributions reduce your taxable income today. A $10,000 contribution in the 22% bracket saves $2,200 in current taxes, but every dollar withdrawn in retirement is taxed as ordinary income. Roth 401(k) contributions are made after-tax (no current deduction), but all withdrawals in retirement - including decades of growth - are completely tax-free. If you contribute $10,000 to a Roth 401(k) at age 30 and it grows to $76,000 by age 65, the entire $76,000 comes out tax-free. The choice depends on whether you expect higher or lower tax rates in retirement compared to now.

What Happens to Your 401(k) When You Change Jobs?

You have four options. Leave it with the former employer plan (if the balance exceeds $5,000). Roll it into your new employer 401(k). Roll it into a traditional IRA. Cash it out (worst option). Cashing out triggers income tax on the full amount plus a 10% early withdrawal penalty if you are under 59.5, potentially losing 30-40% to taxes and penalties. A $50,000 balance cashed out at age 35 in the 22% bracket nets roughly $34,000 after taxes and penalty - and loses potentially $380,000 in growth that money would have generated by age 65. Rolling over preserves the tax-deferred growth and costs nothing.

Early Withdrawal Rules and Exceptions

Withdrawals before age 59.5 generally incur a 10% penalty plus ordinary income tax. Exceptions include: the Rule of 55 (penalty-free withdrawals if you leave your job at age 55 or later), substantially equal periodic payments (SEPP/72t), qualifying hardship withdrawals (medical expenses, disability, preventing eviction), and Roth contributions (not earnings) which can be withdrawn tax and penalty-free at any time since they were already taxed. Loans against your 401(k) balance (up to $50,000 or 50% of balance) avoid taxes and penalty but must be repaid within 5 years, or immediately upon leaving the employer.

Required Minimum Distributions After Retirement

Traditional 401(k) and IRA accounts require minimum distributions (RMDs) starting at age 73 (under current law, rising to 75 in 2033). The annual RMD amount is your account balance divided by a life expectancy factor from IRS tables. At age 73 with a $1,000,000 balance, the first RMD is approximately $37,740. Failure to withdraw the required amount results in a 25% excise tax on the shortfall. Roth 401(k) accounts were previously subject to RMDs, but starting in 2024, Roth 401(k) accounts are exempt from RMDs during the owner lifetime. This makes Roth 401(k) contributions especially valuable for estate planning and tax-free growth in later years.

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