401(k) Calculator

How a 401(k) actually grows

A 401(k) is a retirement account offered through your job. You choose a percentage of every paycheck to divert into the account, and it is invested in mutual funds you pick from a menu. The money grows tax deferred (or tax free with a Roth 401(k)), and you get to keep decades of compound growth working on your side.

The employer match is free money

If your employer matches contributions, always contribute enough to capture the full match. A common formula is "100 percent of the first 5 percent of pay." If you make $80,000 and contribute 5 percent, that is $4,000 from you and $4,000 from your employer. Contributing only 3 percent instead of 5 percent walks away from $1,600 a year in real compensation. Over 30 years and a 7 percent return, that missed match alone could be worth around $150,000.

2025 contribution limits

In 2025 you can contribute up to $23,500 of your own money. At age 50 and above you can add a $7,500 catch-up. SECURE 2.0 also introduced a larger catch-up of $11,250 for ages 60 through 63. Your employer match does not count against these limits.

Traditional vs Roth 401(k)

Traditional contributions lower your taxable income today and are taxed as ordinary income when you take them out in retirement. Roth contributions are made with after-tax dollars, but qualified withdrawals come out completely tax free. If you expect your future tax bracket to be similar or higher than today, Roth is often the better choice. Splitting between the two hedges tax risk.

Why time in the market matters

Compounding is math, but it feels like magic because it accelerates late. A dollar invested at age 25 has 40 years to double roughly five and a half times at a 7 percent return. The same dollar invested at age 45 has time to double only twice. Starting early, even at a small percentage, usually beats starting late at a large percentage.

Common pitfalls to avoid

• Cashing out when you change jobs. Roll the balance into an IRA or your new 401(k) instead.
• Leaving contributions at the default 3 percent forever. Auto-escalate 1 percent per year.
• Holding too much company stock. Concentration risk can wipe out years of savings.
• Ignoring fund fees. Choose low-cost index funds where available.

Numbers here are estimates. Your real balance will depend on market returns, fees, and how consistently you contribute.