US 401(k) Calculator

The employer match is the closest thing to free money in the US tax code. A common match is '50% up to 6% of salary', meaning if you contribute 6% of pay, your employer adds another 3%. On a $100,000 salary that is $3,000/year of free contribution. Over 30 years at 7% growth that match alone becomes about $310,000.

Always contribute at least enough to get the full match - declining the match is leaving compensation on the table. Past the match, traditional 401(k) contributions still get pre-tax treatment and tax-deferred growth, but the math vs an IRA or Roth IRA gets more nuanced. The 2024 employee contribution limit is $23,000 ($30,500 if 50+); employer match counts on top of that.

Traditional 401(k) cuts your tax bill now (pre-tax contribution) and you pay income tax on withdrawals in retirement. Roth 401(k) takes after-tax money but withdrawals (including all the gains) come out tax-free if you wait until 59 and a half and the account is at least 5 years old. The choice usually comes down to: do you expect higher tax rates now or in retirement.

Younger high earners often pick Roth because their compounding gains will be enormous and avoiding tax on them is huge. Late-career high earners often pick traditional because they will likely retire at a lower marginal rate. Many people split contributions across both. Note that the employer match always goes into a traditional bucket regardless of which the employee picks.

Your own contributions are always 100% yours from day one. Employer match contributions usually vest over time - either cliff vesting (0% for 3 years, then 100%) or graded (20% per year over 5 years is common). Leave a job before fully vested and you forfeit the unvested employer portion.

Always check vesting before leaving a job within 5 years of starting it. Sometimes a 6-month delay to a job change captures another 20-40% of vested employer contributions. After leaving, you can roll your 401(k) into an IRA or new employer's 401(k) - rolling to an IRA gives you more investment options but can complicate future Roth backdoor strategies.

Saving $500/month from age 25 to 65 at 7% real return becomes about $1.2 million. The same $500/month from 35 to 65 becomes only $570,000 - half, despite saving for 75% as long, because the first decade does the heaviest compounding work. The cost of a 10-year delay in starting is enormous and impossible to fully catch up.

Most 401(k) plans default to a target-date fund based on your retirement year. Default settings have improved a lot since the 2006 Pension Protection Act; the auto-escalation features in modern plans (raising contribution rate 1% a year automatically) routinely produce better outcomes than active rebalancing. Use the [Compound Interest Calculator](/compound-interest-calculator) to model different contribution levels and time horizons.