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401(k) Calculator

What Is a 401(k)?

A 401(k) is an employer-sponsored retirement savings plan that lets you contribute a portion of your pre-tax or after-tax salary to a tax-advantaged investment account. Contributions grow tax-deferred (Traditional) or tax-free (Roth), and many employers offer matching contributions — essentially free money that can dramatically accelerate your retirement savings. The plan is named after section 401(k) of the Internal Revenue Code and has become the most popular retirement savings vehicle in the United States, with over 70 million active participants managing more than $7 trillion in assets.

Traditional vs Roth 401(k)

With a Traditional 401(k), contributions are made pre-tax, reducing your current taxable income. Your money grows tax-deferred, but you pay ordinary income tax on withdrawals in retirement. With a Roth 401(k), contributions are made after-tax (no upfront tax break), but qualified withdrawals in retirement are completely tax-free. The right choice depends on whether you expect your tax rate to be higher or lower in retirement. If you expect higher taxes later (early career, rising income), Roth is typically better. If you're in your peak earning years and expect lower taxes in retirement, Traditional usually wins. Note that employer matching contributions always go into a Traditional (pre-tax) account, even if you choose Roth for your own contributions.

Frequently Asked Questions

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

At minimum, contribute enough to get the full employer match — anything less means leaving free money on the table. Financial advisors generally recommend saving 10-15% of your gross income for retirement. If you can't reach that immediately, start with the match and increase by 1% each year until you reach your target.

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

Your own contributions are always yours. For employer match, you keep only the vested portion based on your vesting schedule. You can leave the money in your old plan, roll it into your new employer's plan, roll it into an IRA, or cash it out (not recommended due to taxes and penalties). A direct rollover to an IRA or new 401(k) avoids tax consequences.

Can I withdraw from my 401(k) before age 59½?

Yes, but early withdrawals from a Traditional 401(k) are subject to ordinary income tax plus a 10% early withdrawal penalty. Exceptions include disability, certain medical expenses, the Rule of 55 (separation from service at age 55+), and substantially equal periodic payments. Roth 401(k) contributions (not earnings) can be withdrawn tax and penalty-free since they were made after-tax.

Should I choose Traditional or Roth 401(k)?

Choose Roth if you expect to be in a higher tax bracket in retirement, are early in your career with rising income, or want tax-free withdrawals. Choose Traditional if you're in your peak earning years and expect lower taxes in retirement, want to maximize your current take-home pay reduction of taxable income, or need the largest immediate tax break. Many advisors recommend having both for tax diversification.

How does the employer match work exactly?

Employer match is typically expressed as a percentage of your contribution up to a salary limit. For example, '50% match up to 6%' means: if you contribute 6% of your $80K salary ($4,800), your employer adds 50% of that ($2,400). If you only contribute 3%, they match 50% of 3% ($1,200). Contributing less than the match limit means missing out on free money.

What are the 2025 IRS contribution limits?

For 2025, the employee contribution limit is $23,500 (under age 50). Workers age 50+ can add $7,500 in catch-up contributions for a total of $31,000. Under SECURE 2.0, workers ages 60-63 get a super catch-up of $11,250 extra (total $34,750). The combined employee plus employer limit is $70,000 ($77,500 with catch-up). For 2026, limits increase to $24,500 base and $72,000 combined.