What is a 401(k)?
A 401(k) is a retirement savings plan offered through an employer in the United States. You choose a percentage of each paycheck to invest, and many employers add a matching contribution. Money in a traditional 401(k) goes in before income tax and grows tax-deferred, so you pay tax when you take it out in retirement. Many plans also offer a Roth option, where you pay tax now and qualified withdrawals later are tax-free.
How the employer match works
A match is extra money from your employer when you contribute. A common formula is '50% of the first 6% of pay'. If you earn $75,000 and contribute at least 6% ($4,500), the employer adds 50% of that, or $2,250. If you only contribute 3%, you would get a match on 3% only.
The match is the simplest way to improve your return, because it is added on top of your own saving. This calculator takes your match rate and match cap, so you can try the effect of contributing more.
How to estimate your 401(k) by hand
- Work out your yearly contribution (salary ร your %).
- Add the employer match.
- Grow the existing balance and each new contribution by your expected annual return.
- Raise your salary by your expected annual raise each year and repeat until retirement.
That repeated growth is called compounding, and it is why starting early matters so much. The calculator above runs these steps month by month, which gives a more accurate answer than a single yearly rate would.
What return should I assume?
Nobody knows future returns. A long-term mix of stocks and bonds has historically earned more than inflation over long periods, but returns differ greatly from year to year and are not guaranteed. A rate of 5% to 7% before inflation is often used for planning, and a lower figure is more cautious. Fees reduce your return, so a fund with a 1% yearly fee takes about 1 point off your rate. Try several rates and see how much the answer changes.
Contribution limits
The IRS sets a yearly limit on employee 401(k) contributions, and it changes most years. For 2026 the employee limit is $24,500, with a higher limit for people age 50 and over through catch-up contributions. Always check the current numbers at irs.gov, because limits and rules can change. Your employer's match does not count against your own limit, but there is a separate overall limit for total contributions.
Ways to grow your balance
- Get the full match first. It is the best return available to most people.
- Raise your rate a little each year. Moving from 8% to 10% makes a big difference over decades.
- Keep fees low. Compare the expense ratios of the funds in your plan.
- Start earlier. Ten extra years of growth often matters more than a higher contribution later.
- Avoid cashing out when you change jobs. Roll the money into an IRA or the new plan instead.