How Your 401(k) Grows
A 401(k) is an employer-sponsored retirement plan that lets you contribute pre-tax dollars. Many employers offer matching contributions, essentially free money.
2025 Contribution Limits
| Category | Limit |
|---|---|
| Employee under 50 | $23,500 |
| Employee 50+ | $31,000 |
| Total (employee+employer) | $70,000 |
Tips to Maximize Your 401(k)
- Always contribute enough for the full employer match
- Increase contributions by 1% each year
- Choose low-cost index funds
- Consider Roth 401(k) if you expect higher taxes in retirement
How to Use This 401(k) Calculator
Enter your current age, annual salary, contribution percentage, and employer match details. The calculator projects your 401(k) balance at retirement using compound growth.
Formula & How It Works
Future Value = Ξ£ (Annual Contribution Γ (1 + r)^n), where r is annual return rate and n is years remaining. Employer match is added to each contribution up to the match limit.
Calculation Example
Age 30, salary $70,000, 10% contribution ($7,000/yr), 50% employer match up to 6% ($2,100/yr). At 7% annual return, by age 65 you would have approximately $1,180,000.
Expert Tips
Always contribute at least enough to get the full employer match β it is free money. Consider increasing contributions by 1% each year. The 2026 contribution limit is $23,500 ($31,000 if 50+).
Frequently Asked Questions
What happens if I withdraw before 59½?
Early withdrawals are subject to a 10% penalty plus income tax. Exceptions include hardship withdrawals, disability, and the Rule of 55.
Should I choose Traditional or Roth 401(k)?
Traditional reduces current taxes; Roth provides tax-free withdrawals in retirement. Choose Roth if you expect higher future tax rates.
Can I contribute to both 401(k) and IRA?
Yes. The $23,500 401(k) limit and $7,000 IRA limit are separate. IRA deductibility may be limited with a workplace plan.