Last updated March 2026
401(k) Retirement Calculator
Estimate how much your 401(k) will be worth at retirement, including employer match and salary growth.
| Age | Your Contribution | Employer Match | Balance |
|---|
What Is a 401(k)?
A 401(k) is a tax-advantaged retirement savings plan offered by employers in the United States. Named after section 401(k) of the Internal Revenue Code, it allows employees to contribute a portion of their pre-tax salary to an investment account. The money grows tax-deferred, meaning you do not pay taxes on contributions or investment gains until you withdraw the funds in retirement.
There are two main types of 401(k) plans. A traditional 401(k) uses pre-tax dollars, reducing your taxable income today. A Roth 401(k) uses after-tax dollars, but qualified withdrawals in retirement are completely tax-free. Many employers offer both options, and choosing between them depends on whether you expect to be in a higher or lower tax bracket in retirement.
How Employer Matching Works
Employer matching is one of the most valuable benefits of a 401(k). Your employer contributes additional money to your account based on how much you contribute. A common formula is a 50% match on contributions up to 6% of your salary.
For example, if you earn $60,000 and contribute 6% ($3,600 per year), your employer would add 50% of that amount ($1,800), giving you a total annual contribution of $5,400. Failing to contribute enough to receive the full match is equivalent to declining a pay raise.
Match formulas vary by employer. Some offer dollar-for-dollar matching (100%) up to a certain percentage, while others may match at lower rates but on a larger portion of your salary. Be sure to understand your specific plan's vesting schedule, which determines when the employer's contributions fully belong to you.
401(k) Contribution Limits
The IRS sets annual limits on how much you can contribute to a 401(k). For 2025, the employee contribution limit is $23,500 for those under 50. If you are 50 or older, you can make an additional catch-up contribution of $7,500, bringing your total to $31,000.
Employer contributions are not counted toward your employee limit, but the total of all contributions (employee plus employer) cannot exceed $70,000 in 2025 (or $77,500 with catch-up contributions). These limits are adjusted for inflation periodically.
Future Value = Balance x (1 + r)n + Annual x [(1 + r)n - 1] / r Investment Strategy for Your 401(k)
How you invest your 401(k) matters just as much as how much you contribute. Most plans offer a menu of mutual funds, including stock funds, bond funds, and target-date funds. Your investment choices determine whether your account grows at 5%, 7%, or 10% per year, and over decades that difference is enormous.
Asset Allocation by Age
A common rule of thumb is to subtract your age from 110 to determine the percentage of your portfolio that should be in stocks, with the remainder in bonds. A 30-year-old might hold 80% stocks and 20% bonds, while a 55-year-old might shift to 55% stocks and 45% bonds. Younger investors can afford more stock exposure because they have decades to recover from market downturns.
Target-Date Funds
Target-date funds (TDFs) automatically adjust your asset allocation as you approach retirement. If you plan to retire around 2060, you would select a 2060 target-date fund. These are a convenient option for investors who prefer a hands-off approach. Most TDFs shift from aggressive stock-heavy allocations in the early years to more conservative bond-heavy allocations near the target retirement date.
Index Funds vs. Actively Managed Funds
Many 401(k) plans offer both index funds (which track a market benchmark like the S&P 500) and actively managed funds (where a manager picks individual stocks). Research consistently shows that low-cost index funds outperform most actively managed funds over the long term, largely because of lower expense ratios. Look for funds with expense ratios below 0.20% to maximize your returns.
Rebalancing
Over time, market performance can cause your portfolio to drift from its target allocation. For example, a strong stock market year might push your 80/20 stock-to-bond ratio to 90/10, exposing you to more risk than intended. Reviewing and rebalancing your investments at least once a year ensures you maintain your desired level of risk. Many 401(k) plans offer automatic rebalancing features.
Traditional vs. Roth 401(k)
If your employer offers both options, choosing between a traditional and Roth 401(k) is an important decision. With a traditional 401(k), contributions are made pre-tax, lowering your taxable income today. You pay income tax on withdrawals in retirement. With a Roth 401(k), contributions are made after-tax, so there is no immediate tax benefit, but qualified withdrawals in retirement are completely tax-free.
In general, if you expect your tax rate to be higher in retirement than it is today (perhaps because your income will grow significantly), the Roth option may save you more over time. If you expect your tax rate to be lower in retirement, the traditional option provides more benefit. Many financial planners recommend splitting contributions between both types to diversify your tax exposure.
Common 401(k) Mistakes to Avoid
- Not contributing enough to get the full match. This is the most expensive mistake. An employer match is a guaranteed 50-100% return on your contribution.
- Cashing out when changing jobs. Early withdrawals before age 59.5 incur a 10% penalty plus income tax. Roll your old 401(k) into your new employer's plan or an IRA instead.
- Being too conservative too early. Young investors who hold only bonds or stable value funds miss out on decades of stock market growth. Time in the market is your greatest asset.
- Ignoring fees. High fund expense ratios compound against you over time. A 1% fee difference on a $500,000 portfolio costs $5,000 per year.
- Not increasing contributions with raises. When your salary goes up, increase your 401(k) contribution percentage to accelerate your savings without feeling the pinch.
401(k) Withdrawal Rules
You can begin withdrawing from a traditional 401(k) without penalty at age 59 and a half. Withdrawals before that age incur a 10% early withdrawal penalty plus ordinary income tax on the amount withdrawn. There are a few exceptions, including disability, certain medical expenses, and the "Rule of 55," which allows penalty-free withdrawals if you leave your employer at age 55 or older.
Required Minimum Distributions (RMDs) begin at age 73 for most account holders. If you do not withdraw the required amount, the IRS imposes a 25% excise tax on the shortfall. Roth 401(k) accounts are also subject to RMDs unless you roll the balance into a Roth IRA before reaching the RMD age.
When you leave a job, you have several options for your 401(k): leave it with your former employer (if the balance exceeds $7,000), roll it into your new employer's plan, roll it into a traditional or Roth IRA, or cash it out (not recommended due to taxes and penalties). A direct rollover to an IRA is often the best choice because it gives you the widest selection of investment options and avoids any tax consequences.
Traditional vs Roth 401(k): Which Is Better for You?
The choice between traditional and Roth 401(k) contributions depends primarily on your current tax bracket versus your expected tax bracket in retirement. Here is a detailed comparison to help you decide.
| Factor | Traditional 401(k) | Roth 401(k) |
|---|---|---|
| Tax Treatment Now | Contributions reduce taxable income | No tax break now |
| Tax Treatment in Retirement | Withdrawals taxed as ordinary income | Qualified withdrawals are 100% tax-free |
| Best When | Current tax bracket is higher than expected retirement bracket | Current tax bracket is lower than expected retirement bracket |
| Example: 22% Bracket, $23,500 Contribution | Saves $5,170 in taxes today | All growth and withdrawals tax-free forever |
| RMDs (Required Minimum Distributions) | Required starting at age 73 | Not required (since SECURE 2.0 Act) |
| Best For | High earners expecting lower retirement income | Young workers, those expecting higher future income, estate planning |
Pro tip: Many financial advisors recommend splitting contributions 50/50 between traditional and Roth 401(k) if your employer offers both. This creates tax diversification — you will have both taxable and tax-free income sources in retirement, giving you flexibility to manage your tax bracket year by year.
How Long Does It Take to Become a 401(k) Millionaire?
Reaching $1 million in your 401(k) is achievable for most workers who start early and contribute consistently. Here is how long it takes at different contribution levels assuming a 7 percent average annual return with a 3 percent employer match on a $75,000 salary.
| Monthly Contribution | % of Salary | Years to $500K | Years to $1M | Total Contributed |
|---|---|---|---|---|
| $375 + $187 match | 6% | ~22 years | ~30 years | $202,500 |
| $625 + $187 match | 10% | ~18 years | ~26 years | $292,500 |
| $937 + $187 match | 15% | ~15 years | ~23 years | $382,500 |
| $1,958 (max) + $187 match | Max | ~12 years | ~19 years | $563,000 |
The key takeaway: at a 10 percent contribution rate with a 3 percent match, a worker earning $75,000 can reach millionaire status in about 26 years. Start at age 25, and you hit $1 million by 51 — well before traditional retirement age. The employer match alone contributes over $67,000 in free money over that period. Never leave matching dollars on the table.
Frequently Asked Questions
How much should I contribute to my 401(k)?
Financial advisors generally recommend contributing at least enough to get the full employer match, as that is essentially free money. Ideally, aim to save 10-15% of your gross salary for retirement. The IRS sets annual contribution limits, which are $23,500 for those under 50 and $31,000 for those 50 and older in 2025.
How does employer matching work in a 401(k)?
Employer matching means your company contributes additional money to your 401(k) based on your own contributions. A common match is 50% of your contributions up to 6% of your salary. For example, if you earn $60,000 and contribute 6% ($3,600), your employer adds 50% of that ($1,800). Not taking advantage of the full match is leaving free money on the table.
What is the 4% rule for retirement withdrawals?
The 4% rule is a guideline suggesting you can withdraw 4% of your retirement portfolio in the first year, then adjust for inflation each subsequent year, with a high probability your savings will last at least 30 years. For example, a $1,000,000 portfolio would provide $40,000 per year or about $3,333 per month in retirement income.
Related Calculators
- Retirement Savings Calculator - Project your retirement nest egg growth.
- Compound Interest Calculator - See how compounding accelerates your savings.
- Investment Calculator - Estimate returns on general investments.