401k Calculator

Three calculators sit above. The first projects a 401(k) balance to retirement and then shows what it supports in withdrawals. The second works out what an early withdrawal actually leaves in your pocket after penalty and tax. The third finds the contribution rate window that captures every dollar of employer match without hitting the IRS limit early.

On the default figures, a 30-year-old earning $75,000 with $35,000 saved, contributing 10% with a 50% match on the first 3%, reaches $1,711,800 by 65. Only $556,485 of that is money anyone put in. The other $1,155,315 is investment growth.

What a 401(k) is

A 401(k) is an employer-sponsored retirement account named after the subsection of the Internal Revenue Code that created it, added by the Revenue Act of 1978. Contributions come out of your pay before income tax, and nothing inside the account is taxed as it grows. Dividends, interest, and capital gains all accumulate untouched, and tax is due only when money comes out, normally in retirement when many people sit in a lower bracket.

Employees choose a percentage of salary to defer, subject to the annual IRS cap and to any lower ceiling their plan sets. Many employers add a matching contribution on top. The IRS limit rises with inflation: the 2025 elective deferral limit was $23,500, and for 2026 it is $24,500. People who cannot join an employer plan, mainly the self-employed, can open a solo 401(k) instead.

What works in a 401(k)'s favour

• Tax-deferred growth. Nothing is taxed along the way, so the full balance keeps compounding rather than a post-tax remainder. Over 35 years that difference is enormous, which is the whole reason the account exists.
• The employer match. A dollar-for-dollar match is an immediate 100% return, before the investments do anything. Surveys have found a large share of employees would rather take a smaller salary with a bigger match than the reverse, which tells you how the people who have run the numbers feel about it.
• Contributions reduce taxable income. Unlike traditional IRA contributions, which phase out for some earners, 401(k) deferrals always lower the income you are taxed on.
• High limits. For 2026, $24,500 under 50, $32,500 at 50 and over, and $35,750 for ages 60 to 63 under the enhanced catch-up. The comparable IRA limits are $7,500 and $8,600.
• Creditor protection. Balances are generally shielded in bankruptcy, which is a strong argument against raiding a 401(k) to clear debt or fund a business.

And what does not

• A short investment menu. You get what the plan offers, typically a handful of funds, rather than the open market available in a brokerage account.
• Fees. Administration costs are often charged as a percentage of assets, and participants have little say. Choosing the lowest-cost index funds on the menu is usually the only lever available.
• The money is locked up. Withdrawals before 59½ trigger a 10% penalty on top of income tax, with limited exceptions.
• Vesting. Employer money may not be fully yours for years. Leave early and you forfeit the unvested part.
• Waiting periods. Some plans make new hires wait before joining. Six months is common, and one year is the longest the law allows.

Defined contribution, not defined benefit

A traditional pension is a defined benefit plan: the employer promises a formula-based income for life and carries the investment risk. A 401(k) is a defined contribution plan, where you choose the investments and carry the risk yourself. The 401(k) is now the dominant private-sector retirement plan in the U.S., and the reason is largely about job tenure. Pensions rewarded staying 25 years or more with one employer, which described the workforce of the 1970s far better than today's. Defined contribution balances move with you.

When you change jobs you generally have four options: leave the money in the old plan, roll it into the new employer's plan, roll it into an IRA, or cash out and pay tax plus the penalty. The first three are tax-free transfers; the fourth is almost always the expensive choice. Plan rules vary, and indirect rollovers are limited to one per twelve months.

How the employer match works

A match is a contribution your employer makes conditional on yours, capped at a stated share of salary. There is no match without an employee contribution, and not every plan offers one.

The common shape is a partial match: 50% of what you contribute, up to 6% of salary, which maxes out at 3% of salary from the employer. Dollar-for-dollar up to a lower percentage is also widespread. Some plans use two tiers, such as 50% on the first 3% and 20% on the next 3%, which is what the third calculator above is built for.

Capturing the full match usually outranks almost anything else you could do with the money, including paying down moderate-interest debt, because the return is immediate and certain rather than projected. Total annual additions from all sources cannot exceed the lesser of your compensation or $72,000 in 2026.

One trap the third calculator exists to catch: contributing too high a percentage can end the match early. If you hit the $24,500 deferral cap in September, your contributions stop, and so does the match for the rest of the year. On a $75,000 salary the safe window runs from 6% up to about 32.67%.

Vesting schedules

Vesting decides how much of the employer's money you actually own. Your own contributions are always 100% yours from day one; the match may not be.

A four-year graded schedule is common: 25% after the first year, 50% after two, 75% after three, and fully vested at four. Leave at two and a half years and you keep half the employer contributions. The alternative is cliff vesting, where nothing is yours until a set date and then all of it is at once. Leaving a month before a cliff means forfeiting the entire match, which is worth checking before handing in notice. Plan documents or HR will confirm which schedule applies.

What an early withdrawal really costs

Take money out before 59½ and you normally owe a 10% penalty plus ordinary income tax on the whole amount. The second calculator above shows the damage: on a $10,000 withdrawal at a 25% federal and 5% state rate, $1,000 goes to the penalty and $3,000 to tax, leaving $6,000. You gave up $10,000 of invested capital to receive 60 cents on the dollar.

The larger cost is invisible on that receipt. That same $10,000, left alone for 25 years at 6%, would have become about $42,900. Withdrawals are also added to your income for the year, which can push you into a higher bracket and raise the tax on the rest of your earnings.

Hardship withdrawals are permitted by some plans with documented need, and cannot be repaid into the account afterwards. Qualifying circumstances typically include unreimbursed medical expenses above 7.5% of adjusted gross income, buying a principal residence, tuition and education costs for the coming twelve months, preventing eviction or foreclosure, funeral costs, and repairing damage to a main home.

Penalty exceptions that are not hardship-based include death, a qualifying disability, leaving your employer in or after the year you turn 55, withdrawals up to deductible medical expenses, amounts paid under a qualified domestic relations order, and substantially equal periodic payments under IRS rule 72(t). Income tax still applies in every one of these cases; only the 10% penalty is waived.

Taking money out in retirement

From 59½ you can withdraw freely, and there are four broad routes.

Take distributions. A lump sum gives immediate access but ends the tax deferral and lands the whole amount in one tax year, often at a punishing rate. Instalments are the more common choice, and the hard question is how much. The 4% rule, withdrawing 4% of the starting balance and adjusting for inflation, is the usual starting point. The first calculator above shows three specific alternatives on your numbers: a level monthly amount, a level annual amount, and a monthly amount that rises with inflation so its purchasing power holds steady.

Roll it over. Moving the balance to an IRA or a new employer's plan is tax-free and usually widens the investment menu. Moving after-tax money into a Roth IRA adds tax diversification.

Buy an annuity. Some plans allow conversion into an annuity, which pays a monthly income for life, or for two lives under a joint-and-survivor contract. The conversion itself is not a taxable event.

Do nothing. Leaving the balance invested keeps the tax deferral running, up to the point where the law forces your hand.

Required minimum distributions

From age 73 the IRS requires annual withdrawals, calculated by dividing the prior 31 December balance by a life-expectancy factor that shifts slightly each year. The first one is due by 1 April of the year after you turn 73; every later one by 31 December. The same rules cover traditional, SIMPLE, and SEP IRAs.

Missing an RMD is expensive. The penalty is 25% of the shortfall, dropping to 10% if you correct it promptly and file Form 5329, and the IRS can waive it entirely for reasonable cause. One exception exists: if you are still working at 73 and own less than 5% of the company, your current employer's plan can be left alone until you retire, provided the plan permits it. Roth 401(k)s no longer carry RMDs at all.

Solo and self-directed 401(k)s

A solo 401(k) lets a self-employed person run their own plan. The core rules carry over: pre-tax contributions, the same limits, the 59½ penalty age, and RMDs from 73. What changes is the investment menu. A self-directed plan can hold almost anything the plan document allows, including real estate, tax liens, precious metals, foreign currency, and private lending, which is the main reason people choose one.

These plans also allow participant loans for any purpose, capped at 50% of the account value or $50,000, whichever is less. The loan is not taxed provided it is repaid on schedule.

Roth 401(k)

A Roth 401(k) reverses the tax timing. Contributions come from after-tax pay, so there is no deduction now, and qualified withdrawals in retirement are entirely tax-free. The contribution limits are shared with the traditional version: $24,500 for 2026, $32,500 at 50 and over, $35,750 for ages 60 to 63, across both accounts combined.

Two differences from a Roth IRA matter. Contributions cannot be withdrawn free of penalty until the account has been open five years, a rule that applies even past 59½, whereas Roth IRA contributions can be taken out at any time. On the other side, Roth 401(k)s lost their RMD requirement in 2024, closing the gap that used to make rolling into a Roth IRA necessary.

Splitting contributions between traditional and Roth is allowed as long as the combined total respects the annual limit. It is a reasonable hedge when you genuinely do not know whether your tax rate in retirement will be higher or lower than it is today. To compare the two side by side, see our Roth IRA Calculator and the IRA Calculator.

How these calculators work

The projection grows your salary at the rate you set, applies your contribution percentage and the employer match each year, and compounds the balance at your expected return. Contributions land through the year rather than in one lump, so they are credited with roughly half a year of growth, which is why the result sits between a start-of-year and end-of-year assumption. Purchasing power is the ending balance discounted at your inflation rate over the years to retirement.

The withdrawal figures then treat the balance as an annuity over your remaining life expectancy at the same rate of return. The early withdrawal calculator applies the 10% penalty unless you flag a disability or another exemption, then adds federal, state, and local tax at the rates you enter. The match optimiser finds the lowest rate that captures every tier of the match and the highest rate that still spreads contributions across the full year. For the wider retirement picture, use the Retirement Calculator, and the Investment Calculator for money outside the plan.