401(k) Calculator
What Is a 401(k)?
A 401(k) is a popular U.S.-based retirement savings plan that allows employees to contribute a portion of their income toward retirement while enjoying tax advantages. It gets its name from Section 401(k) of the Internal Revenue Code, introduced by the Revenue Act of 1978.
Contributions to a traditional 401(k) are made before taxes, reducing taxable income for the year. The money then grows tax-deferred until withdrawal, typically during retirement. Some employers also offer a Roth 401(k) option, which allows after-tax contributions but tax-free withdrawals later in life.
For 2025, the IRS contribution limit is $23,500 for individuals under 50, and $31,000 for those aged 50 or older.
How the 401(k) Calculator Works
Our 401(k) calculator helps estimate the future value of your retirement savings based on your:
- Annual income and contribution percentage
- Employer match (if available)
- Investment return rate
- Years until retirement
Simply enter your details and the calculator will project your total retirement balance and potential growth over time.
Advantages of a 401(k)
- Tax-deferred growth: Your investments grow without being taxed until withdrawal.
- Employer matching: Many employers match a portion of employee contributions — essentially free money toward your retirement.
- High contribution limits: Compared to IRAs, 401(k)s offer higher annual contribution ceilings.
- Automatic payroll deductions: Contributions are made seamlessly, encouraging consistent savings habits.
- Creditor protection: 401(k) assets are generally protected under federal law.
Potential Drawbacks
- Limited investment options: Choices are often restricted to your employer’s selected funds.
- Fees and administrative costs: Some plans charge management or fund fees.
- Withdrawal penalties: Funds withdrawn before age 59½ usually incur a 10% penalty plus income tax.
- Vesting periods: Employer-matched contributions may take time to fully belong to the employee.
401(k) vs. Defined Benefit Plans
A 401(k) is a defined contribution plan (DCP) — you control how much to contribute and where to invest, but your final retirement amount depends on market performance.
In contrast, defined benefit plans (DBPs) or pensions promise a fixed payout based on salary and years of service.
As the modern workforce becomes more mobile, 401(k)s have largely replaced traditional pensions due to their flexibility and portability.
Employer Match and Vesting
Many employers offer to match employee contributions — for example, matching 50% of your contribution up to 6% of your salary.
However, matched funds may come with a vesting schedule, meaning you must stay with the company for a certain number of years before you fully “own” the employer contributions.
Withdrawals and Retirement Distributions
- Withdrawals are penalty-free after age 59½.
- At age 73, participants must begin Required Minimum Distributions (RMDs).
- Options at retirement include lump-sum withdrawal, installments, annuity conversion, or rollover to an IRA.
Roth and Self-Directed 401(k) Plans
- Roth 401(k): Uses after-tax contributions, but withdrawals in retirement are tax-free.
- Self-Directed 401(k): Allows broader investment options such as real estate, precious metals, or private equity, often used by self-employed individuals.
Using the Calculator
To use the 401(k) calculator on Calculator.expert:
- Enter your current age and expected retirement age.
- Input your salary, contribution rate, and employer match details.
- Set an expected annual return rate.
- Click Calculate to view your projected retirement savings and total growth.
This tool helps visualize how small, consistent contributions can grow into substantial retirement savings over time.
Disclaimer
The 401(k) calculator provides estimates only and should not be considered financial advice. Actual results may vary based on market performance, contribution changes, and plan structure. For personalized guidance, consult a certified financial advisor.