401(k) Calculator Explained

The plan most US savers retire on

A 401(k) is the defined-contribution retirement plan that private-sector US employers offer their staff under IRC §401(k). You defer a percentage of salary on a pre-tax or Roth basis, the employer typically adds a match, the balance compounds inside a tax-sheltered account, and you withdraw from age 59½. The 401(k) calculator projects the balance you will have at retirement from six inputs — current age, retirement age, salary, your deferral percentage, the employer match percentage, and an expected annual return. This article walks the four IRS limits the calculator enforces, the future-value-of-annuity formula it runs, the employer match maths, the Traditional vs Roth decision, the withdrawal rules, and the rollover decisions that arrive when you leave a job.

All dollar figures are 2025 limits taken from IRS Notice 2024-80 (November 2024). The 2026 limits are typically announced in late October each year and will replace these once published.

What a 401(k) actually is

Section 401(k) was added to the Internal Revenue Code in 1978 as a small provision allowing employees to defer compensation on a pre-tax basis. It was not intended as the primary retirement vehicle for the US workforce — that role was supposed to stay with defined-benefit pensions — but by 1981 benefits consultant Ted Benna had built the first true salary-deferral 401(k) at the Johnson Companies, and by the mid-1990s the plan had largely displaced corporate pensions. As of 2024, roughly 70 million Americans actively contribute to a 401(k), and plan assets exceed $8 trillion (Investment Company Institute, Q4 2024 retirement market data).

The plan has four moving parts: your salary deferral (capped under §402(g)), the employer contribution (match, non-elective, or both, capped jointly with your deferral under §415(c)), the investment menu the employer selects, and the rules that decide when you can withdraw. The 401(k) calculator models the contribution and projection side; the investment menu is plan-specific and the withdrawal rules are tax law.

The four limits the calculator enforces

Four IRS limits shape every 401(k) projection. The calculator caps each input so you cannot accidentally project a balance the law would not actually let you accumulate.

§402(g): employee elective deferral — $23,500 (2025)

The amount you can defer out of salary into the 401(k) on a pre-tax or Roth basis. For 2025 the limit is $23,500. If you are 50 or older, the §414(v) standard catch-up adds $7,500, taking your limit to $31,000. SECURE 2.0 added a "super catch-up" of $11,250 for anyone aged 60, 61, 62, or 63 in 2025, bringing their cap to $34,750 — this snaps back to the standard $7,500 catch-up at age 64. The calculator caps your employee percentage at whichever limit applies and flags the cap in the results when your input would exceed it.

§401(a)(17): compensation limit — $350,000 (2025)

Only the first $350,000 of salary counts for employer contributions. If your salary is above $350,000, the calculator caps the salary used for the employer match at $350,000. Your own elective deferral is independent of this — the §402(g) dollar cap always wins on the employee side, so a $1,000,000 salary still maxes out at $23,500 of employee deferral. Most 401(k) participants never approach the §401(a) (17) limit, but tech executives, surgeons, and senior partners can.

§415(c): total annual addition — $70,000 (2025)

The combined cap on employee plus employer contributions to a single plan in a single year: $70,000, or $77,500 with the 50+ catch-up. The cap binds for high earners with generous employer contributions — a $350,000 salary with a 15 % employer non-elective contribution puts employer alone at $52,500, leaving only $17,500 of employee deferral room before §415(c) binds (well below the $23,500 §402(g) cap). The calculator applies §415(c) after both individual limits and warns when it has reduced your total addition.

§414(v): age-50 catch-up — $7,500 standard, $11,250 super (2025)

The catch-up provision that lets older savers stuff more into the plan in the final stretch before retirement. Standard $7,500 at age 50+, super $11,250 at age 60–63 under SECURE 2.0. Catch-up contributions sit on top of the §402(g) base; they do not displace it. The catch-up dies the day you start the year you turn 64 (the super catch-up does — the standard $7,500 catch-up continues indefinitely). High earners (anyone with prior-year wages above $145,000, indexed) will from 2026 be required by SECURE 2.0 §603 to make catch-up contributions on a Roth basis only.

The maths behind the projection

The headline figure — your 401(k) balance at retirement — is the future value of an ordinary annuity. You contribute a fixed amount each year, the balance earns an assumed return, and the contributions compound until you stop. The formula is:

FV = C × ((1 + r)ⁿ − 1) / r

where C is the total annual addition (employee plus employer, after all the caps above), r is the expected annual return as a decimal, and n is years until retirement. When r is zero the formula collapses to C × n. The calculator holds salary constant over the projection horizon — it does not model salary growth, partly because nominal raises are largely cancelled by inflation in real terms, and partly because piling additional assumptions onto a 30-year projection compounds estimation error rather than removing it. If you want a real-terms answer, subtract long-run inflation (roughly 2–3 % per year) from your expected return input.

Note that the formula assumes contributions are made at year-end (ordinary annuity). Real 401(k) contributions land via payroll, usually every two weeks, which is closer to an annuity-due. The practical difference over 30 years at 7 % is about 3.5 % — the annuity-due figure is roughly 1.07× the ordinary-annuity figure. The calculator uses the ordinary-annuity form because it is the conservative figure and the more widely published convention; if you want the annuity-due answer, multiply the headline by 1.07.

Worked example: a 30-year-old on $60,000

Plug the calculator's default inputs into the formulas above.

• Current age 30, retirement age 65 → n = 35 years
• Salary $60,000, employee 6 % → employee = $3,600/year (well under the $23,500 cap)
• Employer 3 % effective match → employer = $1,800/year
• Total annual addition C = $5,400 (well under the $70,000 §415(c) cap)
• Expected return 7 % nominal → r = 0.07
• FV = 5,400 × ((1.07³⁵ − 1) / 0.07) = 5,400 × 138.237 = $746,479
• Total contributed = $5,400 × 35 = $189,000 ($126,000 employee + $63,000 employer)
• Investment growth = $746,479 − $189,000 = $557,479 (75 % of the final balance)

Three takeaways from the numbers. First, three-quarters of the final balance is compound growth, not contributions. That ratio is structural — n sits in the exponent of the formula, C only multiplies — and it gets more extreme the longer the horizon. A 22-year-old who starts the same plan at the same salary and contribution rate ends with about $1.34 million on the same return assumption, almost double the 30-year-old's figure, despite contributing only an extra 8 years of $5,400.

Second, the employer match doubles the contribution dollar-for-dollar in this example. Skipping the match — deferring only 3 % of salary instead of 6 % — drops the projected balance to about $497,000. That $250,000 gap is purely the employer's money that you walked away from by not deferring enough to claim the full match.

Third, pushing the employee deferral from 6 % to 10 % (still less than half the §402(g) cap) lifts the projected balance to roughly $1.05 million on the same assumption. Open the 401(k) calculator and slide the employee percentage to see the curve — the marginal balance per deferred percentage point is enormous when the runway is long.

How employer matching works

Employer matches come in three main shapes. Dollar-for-dollar up to X % ("100 % match on the first 3 %") — the employer contributes a dollar for every dollar you defer up to a cap. Partial match up to X % ("50 % match on the first 6 %") — the employer contributes 50 cents per dollar deferred up to a cap. Tiered match ("100 % on the first 3 % plus 50 % on the next 2 %") — a higher rate for the first slice, a lower rate above it. The common feature is that the match is contingent on you contributing — defer nothing, get nothing.

The calculator asks for the employer match as a percentage of salary because that is the only form that combines cleanly with the deferral in the projection. To convert a match formula to an effective percentage: take your planned employee deferral, work out what the match formula adds at that deferral level, and divide by salary. A "50 % of the first 6 %" match when you defer 6 % adds 3 % of salary; when you defer 4 % it only adds 2 %; when you defer 8 % it still only adds 3 % because the match is capped at the first 6 %. The matched dollars are essentially a 50–100 % guaranteed return in the year you contribute, and they compound from there on — never leave the match on the table unless you cannot make rent.

Vesting matters too. Employer contributions usually vest on a schedule — common ones are 3-year cliff (0 % vested for 3 years, 100 % after) or 6-year graded (20 % per year from year 2 to year 6). Your own deferrals are always 100 % vested from day one. If you leave before the employer contributions vest, those dollars go back to the employer. The calculator assumes full vesting, so if you might leave before vesting completes, mentally discount the employer portion of the projected balance by your vested fraction.

Traditional 401(k) vs Roth 401(k)

Most US 401(k) plans now offer both flavours, and a single $23,500 cap applies across both — they are not separate buckets. The right choice comes down to one question: do you expect your marginal tax rate at retirement to be higher or lower than today?

Traditional 401(k) contributions are pre-tax — they reduce your current taxable income. You pay ordinary income tax on withdrawal. Best if you expect your retirement marginal rate to be lower than your current rate. A 24 % bracket today becoming the 12 % bracket in retirement is a 12-point arbitrage you keep, on every dollar deferred, for every year the position is held.

Roth 401(k) contributions are after-tax. Qualified withdrawals after age 59½ and a 5-year holding period come out tax-free — contributions and growth both. Best if you expect your retirement marginal rate to be higher than today, or if you want the tax diversification of having both Traditional and Roth buckets to draw from in retirement (which lets you manage your taxable income year by year). Employer contributions are almost always pre-tax even when your own contributions are Roth, so the employer match goes into a Traditional sub-account regardless. SECURE 2.0 allowed employer Roth matching in 2024 but plan uptake is still patchy.

The headline figure in the calculator is the pre-tax balance for both. For the Traditional case, mentally subtract your expected retirement marginal rate to get the spendable amount. For the Roth case, the headline is already the spendable amount. Years with unusually low income (early career, sabbatical, salary cut, gap year) are the highest-value years for Roth contributions — the marginal tax cost is lowest exactly when the future tax-free growth runway is longest. See the Roth IRA calculator for the IRA-side equivalent, which also has MAGI phase-outs the 401(k) does not have.

Withdrawal rules: 59½, the Rule of 55, and RMDs

Penalty-free withdrawals from a 401(k) begin at age 59½. Earlier withdrawals face a 10 % early-distribution penalty under §72(t) on top of ordinary income tax. The §72(t) exceptions are:

• Rule of 55: separate from the employer in the year you turn 55 or later, and you can take penalty-free withdrawals from that employer's 401(k) (not from other accounts) immediately. Public-safety employees get this from age 50.
• SEPP / 72(t)(2)(A)(iv): substantially equal periodic payments over your life expectancy, for at least 5 years or until age 59½, whichever is later. Useful for early retirees bridging the gap to 59½.
• Hardship distributions: for immediate and heavy financial need as defined in Treasury Regulation §1.401(k)-1(d)(3) — medical bills, primary-home down payment, tuition, eviction prevention, funeral costs, casualty losses.
• Birth or adoption: up to $5,000 per child, penalty-free, under SECURE Act §113.
• Qualified disaster: up to $22,000 from a federally declared disaster area, under SECURE 2.0.
• Terminal illness: certified by a physician under SECURE 2.0 §326.
• Domestic abuse: up to the lesser of $10,000 or 50 % of the vested account balance, under SECURE 2.0 §314.

Required minimum distributions (RMDs) from a Traditional 401(k) start at age 73 for anyone born 1951–1959, and age 75 for anyone born 1960 or later, under SECURE 2.0. Roth 401(k) lifetime RMDs were eliminated for plan years starting after 2023, matching the Roth IRA rule. See the RMD calculator for the Uniform Lifetime Table factor that applies in any given year.

What to do with old 401(k)s when you change jobs

Job changes are the single most common point at which 401(k) balances get mismanaged. You have four options:

• Leave it. If the balance is above $7,000 (the SECURE 2.0 automatic-rollover threshold), most plans will let you keep the account where it is. Sensible if the old plan has a strong investment menu and low fees, or if you might consolidate later.
• Roll into the new employer's 401(k). Keeps everything in one place and may make Backdoor Roth IRA strategies cleaner (no pro-rata complication from a separate Traditional IRA balance). Only attractive if the new plan's fees and fund choice are competitive.
• Roll into a Traditional IRA. The most common move. Opens the full universe of low-cost index funds, simplifies record-keeping, and gives you direct control. The downside: it can create a pro-rata problem for future Backdoor Roth contributions, and IRA assets enjoy slightly weaker creditor protection than 401(k) assets under federal ERISA rules (state law varies).
• Cash it out. Almost always wrong if you are under 59½. You pay ordinary income tax plus the 10 % penalty, losing 30–40 % of the balance immediately, and you give up the compounding tail. The future value of $50,000 left to grow at 7 % for 30 years is $381,000 — that is the price of cashing it out at age 35.

Use direct trustee-to-trustee rollovers for any move. Indirect rollovers (where the plan sends you a cheque) trigger mandatory 20 % federal tax withholding even when you intend to redeposit the full amount within the 60-day window, and any portion not redeposited within 60 days is treated as a taxable distribution.

Common mistakes

Stopping at the match. The employer match is the floor, not the ceiling. A 3 % match on a $60,000 salary is $1,800/year. The §402(g) limit is $23,500. The gap between those numbers is the retirement balance most participants leave on the table.

Holding company stock as the bulk of the balance. The Enron lesson. A balance heavily concentrated in your employer's stock leaves you doubly exposed — if the employer fails, you lose your job and your retirement at the same time. The standard advice is to cap employer stock at 10 % of the 401(k) balance and rebalance annually.

Ignoring fees. A 1 %/year fee differential compounded over 30 years removes roughly 26 % of the final balance — on the $746,479 worked example, that is about $194,000 of lost retirement spending. Check the fund expense ratios in your plan's 404(a)(5) fee disclosure; if anything is above 0.50 %, see whether the plan also offers a low-cost target-date fund or index fund alternative.

Defaulting into the QDIA without checking it. Plans auto-enrol new hires into a "Qualified Default Investment Alternative" (usually a target-date fund) at a default deferral rate (often 3 %). Both are usually too conservative — the deferral rate is below the match maximum, and the target-date fund may not match your actual risk tolerance. Spend ten minutes on the enrolment portal in your first month.

When to seek professional advice

The 401(k) calculator answers the question "how much will I have at 65?" For the decisions that decide what to actually do — Backdoor Roth strategy, Mega-Backdoor Roth via after-tax 401(k) contributions and in-plan Roth conversions, the §72(t) SEPP rules for early retirees, the Net Unrealised Appreciation treatment of employer stock at distribution, the optimal Social Security claiming age relative to your 401(k) drawdown plan — talk to a fee-only fiduciary financial planner (CFP designation, NAPFA membership) or a CPA. Avoid the "free" 401(k) consultation offered by the firm that runs your plan; that is a sales meeting for ancillary products, not advice. This article and the calculator are informational only and do not constitute personalised financial advice.

Frequently asked questions

See the FAQ section on the 401(k) calculator page for the 2025 contribution limits, employer match mechanics, Traditional vs Roth selection, expected return rules of thumb, withdrawal timing, the $350,000 compensation cap, and what happens to a 401(k) at a job change.

Related calculators

• 401(k) Calculator — Retirement balance projection with 2025 IRS limits
• 403(b) Calculator — Public-sector and nonprofit equivalent with the same §402(g)/§415(c) caps
• Roth IRA Calculator — Tax-free retirement balance with MAGI phase-out check
• IRA Calculator — Traditional vs Roth IRA growth projection with 2025 limits
• RMD Calculator — Required minimum distributions using the IRS Uniform Lifetime Table
• Retirement Calculator — Full retirement income projection across all accounts
• Compound Interest Calculator — Future value of a lump sum plus contributions at any frequency