401k Calculator

A 401(k) is an employer-sponsored retirement savings plan that lets you contribute a portion of your pre-tax paycheck into an investment account. Your contributions grow tax-deferred, meaning you don't pay taxes until you withdraw the money in retirement. Many employers also offer matching contributions, effectively giving you free additional savings.

At minimum, contribute enough to capture your full employer match — this is essentially free money. Beyond that, financial advisors commonly recommend saving 10–15% of your income for retirement. The IRS contribution limit for 2024 is $23,000 per year (plus a $7,500 catch-up contribution if you're 50 or older).

An employer match is when your company contributes to your 401(k) based on what you contribute. For example, a 50% match up to 6% of your salary means if you earn $75,000 and contribute 6% ($4,500), your employer adds another $2,250. Always contribute at least enough to get the full match — it's one of the best returns available.

A traditional 401(k) uses pre-tax contributions — you reduce your taxable income now and pay taxes when you withdraw in retirement. A Roth 401(k) uses after-tax contributions — you pay taxes now but withdrawals in retirement are tax-free. A Roth may be better if you expect to be in a higher tax bracket in retirement.

If you withdraw from your 401(k) before age 59½, you'll generally owe income taxes on the amount plus a 10% early withdrawal penalty. For example, withdrawing $10,000 early could cost you $3,200 or more in taxes and penalties depending on your tax bracket. Hardship exceptions exist but are limited.

The U.S. stock market has historically returned around 7% annually after adjusting for inflation. Many calculators use a nominal (before inflation) return of 8–10% and an inflation rate of 2–3%. A conservative estimate of 6–7% nominal return is reasonable for long-term planning, though actual returns will vary.

Inflation erodes the purchasing power of your savings over time. A $1,000,000 balance in 30 years may only have the purchasing power of roughly $400,000 in today's dollars at 3% inflation. That's why this calculator shows both your projected nominal balance and an inflation-adjusted figure in today's dollars.

You can begin taking penalty-free distributions at age 59½. Required Minimum Distributions (RMDs) must begin at age 73 under current IRS rules. The amount you can withdraw each month depends on your total balance, expected lifespan, and tax rate — this calculator estimates your monthly after-tax distribution based on those factors.