401(k) Calculator

What Is a 401(k)?

A 401(k) is a tax-advantaged retirement savings plan offered by US employers. The name comes from Section 401(k) of the Internal Revenue Code, which established the plan type in 1978. Contributions are made with pre-tax dollars (reducing your taxable income in the year you contribute), grow tax-deferred inside the account, and are taxed as ordinary income when you withdraw them in retirement. This tax deferral is the plan's core advantage — your money compounds on the full pre-tax amount rather than the after-tax amount.

2025 Contribution Limits

The IRS sets annual limits on how much you can contribute to a 401(k):

• Employee contribution limit (2025): $23,500
• Catch-up contributions (age 50–59 and 64+): Additional $7,500 (total $31,000)
• Special catch-up (age 60–63): Additional $11,250 under SECURE 2.0 Act (total $34,750)
• Combined limit (employee + employer contributions): $70,000

Contributing at least enough to capture the full employer match should be the first priority for any 401(k) participant — it is effectively a 50–100% instant return on that portion of your contribution.

How Employer Matching Works

Employer matching is one of the most valuable benefits available — essentially free money added to your retirement savings. Common matching formulas include:

• 100% match up to 3% of salary: If you earn $70,000 and contribute 3% ($2,100), your employer adds another $2,100
• 50% match up to 6% of salary: Contribute 6% ($4,200), and the employer adds 3% ($2,100)
• Dollar-for-dollar match up to a fixed amount: Some employers cap their match at a fixed dollar figure

If you do not contribute enough to get the full employer match, you are leaving a portion of your compensation on the table.

Traditional 401(k) vs Roth 401(k)

If your employer offers a Roth 401(k) option, you contribute after-tax dollars, but all growth and qualified withdrawals in retirement are completely tax-free. The choice between traditional and Roth depends on whether you expect to be in a higher or lower tax bracket in retirement:

• Traditional 401(k): Better if you expect your tax rate to be lower in retirement than today (most common scenario for high earners)
• Roth 401(k): Better if you expect your tax rate to be higher in retirement, or if you value tax-free withdrawals for estate planning

Vesting Schedules

Employer contributions are subject to vesting — meaning you may only own a percentage of the employer match until you have worked at the company for a certain number of years. Common schedules: cliff vesting (0% ownership until year 3, then 100%) and graded vesting (20% per year over 6 years). Always check your plan's vesting schedule before leaving a job.

⚠️ This calculator is for educational and estimation purposes only and is not financial advice. Investment returns are not guaranteed. Consult a certified financial planner (CFP) for personalized retirement planning.