401k Calculator

Employer matching is one of the most valuable benefits of a 401k plan. Common matching formulas include:

• 50% match up to 6%: Employer contributes 50 cents for every dollar you contribute, up to 6% of your salary (3% employer contribution)
• 100% match up to 3%: Employer matches dollar-for-dollar up to 3% of your salary
• 100% match up to 4%, then 50% up to 6%: Full match on first 4%, half match on next 2%

Always contribute at least enough to get the full employer match - it's an immediate 50-100% return on your investment!

The IRS sets annual contribution limits for 401k plans:

• 2024 Limit: $23,000 for employees under age 50
• Catch-up Contributions: Additional $7,500 for employees age 50 and older (total $30,500)
• Total Limit: Combined employee and employer contributions cannot exceed $69,000 ($76,500 with catch-up)

These limits are adjusted periodically for inflation. Employer matching contributions do not count toward your personal contribution limit.

Expected returns vary based on your investment allocation:

• Conservative (bonds, stable value): 3-5% annual return
• Moderate (balanced mix): 5-7% annual return
• Aggressive (stocks, growth funds): 7-10% annual return

Historical stock market returns average around 10% annually, but past performance doesn't guarantee future results. Most financial advisors recommend a diversified portfolio that becomes more conservative as you approach retirement.

Strategies to optimize your 401k savings:

• Get the full match: Always contribute enough to receive the maximum employer match
• Increase contributions gradually: Raise your contribution rate by 1% annually or with each raise
• Start early: Time is your greatest asset due to compound growth
• Automate increases: Many plans offer automatic annual contribution increases
• Rebalance regularly: Review and adjust your investment allocation annually
• Avoid early withdrawals: Withdrawals before age 59½ incur taxes and 10% penalty

Understanding the difference between traditional and Roth 401k contributions:

• Traditional 401k: Pre-tax contributions reduce current taxable income, but withdrawals in retirement are taxed as ordinary income
• Roth 401k: After-tax contributions (no current tax benefit), but qualified withdrawals in retirement are tax-free

Choose traditional if you expect to be in a lower tax bracket in retirement. Choose Roth if you expect higher taxes in retirement or want tax-free income. Many people use a combination of both for tax diversification.