401(k) Calculator
Maximize your retirement savings with our comprehensive 401(k) calculator. See how employer matching, tax benefits, and compound growth can build your retirement wealth.
Understanding 401(k) Retirement Plans
What is a 401(k)?
A 401(k) is an employer-sponsored retirement savings plan that offers significant tax advantages:
- Pre-tax Contributions: Reduce your taxable income now
- Tax-Deferred Growth: Investments grow without annual taxes
- Employer Matching: Free money that boosts your savings
- High Contribution Limits: Save up to $23,000 annually (2024)
- Automatic Payroll Deductions: Easy, consistent saving
401(k) Contribution Limits for 2024
The IRS sets annual limits on 401(k) contributions:
- Under Age 50: $23,000 employee contribution limit
- Age 50+: $30,500 (includes $7,500 catch-up contribution)
- Total Limit: $69,000 (employee + employer contributions)
- Highly Compensated: May face additional restrictions
These limits are adjusted annually for inflation.
Maximizing Employer Match
Never leave free money on the table! Here's how to maximize your employer match:
- Understand Your Match: Know the percentage and limits
- Contribute Enough: At minimum, get the full match
- Vesting Schedule: Know when match funds become yours
- True Rate of Return: A 50% match = instant 50% return!
Example: If your employer matches 50% up to 6% of salary, contribute at least 6% to get the full 3% match.
Traditional vs Roth 401(k)
Many employers now offer both options:
- Traditional 401(k): Tax deduction now, pay taxes in retirement
- Roth 401(k): Pay taxes now, tax-free withdrawals in retirement
- Choose Traditional if: You're in a high tax bracket now
- Choose Roth if: You expect higher taxes in retirement
- Split Strategy: Many people contribute to both
401(k) Optimization Strategies
1. Start Early
Time is your greatest asset. Starting at 25 vs 35 can double your retirement balance due to compound growth.
2. Increase Gradually
Boost contributions by 1% annually. You won't miss the money, and it adds up significantly over time.
3. Invest Wisely
Choose low-cost index funds. A 1% lower fee can mean 20% more money in retirement.
4. Don't Cash Out
Avoid early withdrawals. You'll pay taxes plus a 10% penalty, losing up to 40% of your savings.
Frequently Asked Questions
How much should I contribute to my 401(k)?
At minimum, contribute enough to get your full employer match. Ideally, aim for 10-15% of your income including the match. If possible, max out contributions at $23,000 (2024 limit).
What happens to my 401(k) if I change jobs?
You have several options: leave it with your old employer, roll it to your new employer's plan, roll it to an IRA, or cash out (not recommended due to taxes and penalties).
When can I withdraw from my 401(k)?
You can make penalty-free withdrawals starting at age 59½. Required minimum distributions (RMDs) begin at age 73. Early withdrawals incur a 10% penalty plus income taxes.
Should I take a 401(k) loan?
Generally not recommended. You'll miss out on investment growth, and if you leave your job, you must repay quickly or face taxes and penalties.
What's the difference between vested and unvested funds?
Your contributions are always 100% vested (yours to keep). Employer contributions may vest over time - typically 3-6 years. Check your plan's vesting schedule.