401(k) Calculator
Retirement Savings

A 401(k) is an employer-sponsored retirement savings plan that lets employees contribute a portion of their pre-tax salary to investments. Contributions reduce your taxable income in the year you make them, and investments grow tax-deferred until you withdraw the money in retirement. Many employers also offer a matching contribution up to a defined limit, effectively adding free money to your account. Named for the section of the Internal Revenue Code that governs it, the 401(k) is the most common retirement savings vehicle in the United States.

For 2026, the IRS allows employees to contribute up to $23,500 to a 401(k) plan. Employees aged 50 or older may make an additional catch-up contribution of $7,500, for a total of $31,000. These limits apply to employee elective deferrals only and do not include employer matching contributions. The combined limit (employee + employer) is $70,000 for 2026. The IRS adjusts these limits periodically for inflation, so check IRS.gov for the most current figures.

Employer matching is a contribution your employer makes to your 401(k) based on what you contribute. A common formula is '100% match up to 3% of salary' — if you earn $80,000 and contribute at least 3% ($2,400), your employer also adds $2,400. Some employers use a partial match formula such as '50% match up to 6%' — they contribute $0.50 for every $1 you put in, on your first 6% of salary. Always contribute at least enough to capture the full match. Not doing so is equivalent to leaving part of your compensation on the table.

Vesting refers to your ownership of the employer contributions in your 401(k). Your own contributions are always 100% yours immediately. Employer contributions, however, often vest on a schedule — either 'cliff vesting' (you own 0% until a certain date, then 100%) or 'graded vesting' (you earn ownership gradually over 3–6 years). If you leave your job before you are fully vested, you forfeit the unvested portion of employer contributions. Check your plan's Summary Plan Description for your vesting schedule.

The 4% rule is a widely cited guideline suggesting that retirees can withdraw 4% of their retirement portfolio in the first year of retirement and adjust for inflation each subsequent year, with a historically high probability that the portfolio lasts 30 years. For example, a $1,000,000 portfolio would generate $40,000 in year-one withdrawals, or about $3,333/month. It originated from research by financial planner William Bengen in 1994, using historical market returns. The rule is a starting point, not a guarantee — actual withdrawal sustainability depends on market performance, expenses, and other income sources (Social Security, pension).

A commonly used long-term average annual return for a diversified 401(k) invested primarily in stocks is 7% (inflation-adjusted) to 10% (nominal). The S&P 500 has historically returned approximately 10% annually on a nominal basis. However, most 401(k)s hold a mix of stocks and bonds, which typically produces lower but less volatile returns. If you are younger, a more aggressive allocation (higher stock %, lower bond %) is common. As you approach retirement, many financial advisors recommend shifting to more conservative allocations. Use 5–7% for a conservative estimate, 7–9% for moderate.

In a traditional 401(k), contributions are made with pre-tax dollars, reducing your taxable income now, but withdrawals in retirement are taxed as ordinary income. In a Roth 401(k), contributions are made with after-tax dollars — no upfront tax break — but qualified withdrawals in retirement are tax-free, including all investment growth. If you expect to be in a higher tax bracket in retirement, a Roth 401(k) may be advantageous. Many employers now offer both options. This calculator models the growth mechanics of either account type; the tax treatment differs at withdrawal time.

Yes. You can contribute to both a 401(k) and an Individual Retirement Account (IRA) in the same year. For 2026, the IRA contribution limit is $7,000 ($8,000 if age 50 or older). Traditional IRA contributions may be tax-deductible depending on your income and whether you have a workplace plan. Roth IRA contributions are not deductible but provide tax-free growth; eligibility phases out at higher income levels ($150,000–$165,000 for single filers in 2026). Using both accounts is a common strategy to maximize tax-advantaged retirement savings.