401(k) Calculator

A 401(k) plan is a major retirement savings tool in the United States that allows individuals to save for their retirement. A portion of an individual's paycheck can be contributed pre-tax into an account and often employers will match a certain percentage as well. The money in the account can then be invested until retirement, deferring taxes on it. This calculator summarizes the answers to three common questions about 401(k) plans that many people are interested in knowing.

The menu at the top allows you to switch between three modes: forecasting your expected retirement pot; calculating how much you need to contribute yourself in order to get the full employer match, and working out what's left after taxes and penalties if you take it early.

Predicting future balances in a 401k account.

The first mode forecasts the account balance on a yearly basis. Based on the current balance, it adds up the annual employee and employer contributions and calculates compound interest with an assumed rate of return. If salary increases every year by a fixed percentage, then the contribution will also increase accordingly.

Two main formulas are used in the calculation. The existing balance on the account grows through compound interest.

PV is the current balance, r is the annual return and n is the number of years until retirement. The additional annual contributions are a series of cash flows that increase each year and also compound with interest.

C represents the total contribution for a year, g is the rate of increase in contributions and r and n represent the interest rate and number of years respectively. As the calculator runs this process annually rather than monthly it also allows for IRS annual maximum contribution limits to be taken into account. The end result will break down into three categories: your own contributions, employer match and pure earnings growth.

Calculation of employer contributions

Employer contributions are additional money that the company puts into your account on top of what you contribute. In many systems, employers will match a percentage (50%) of your own contribution up to a certain percentage of salary (6%). In this case, the employer's maximum contribution is 3% of salary. So if you put in the amount required to get the full employer contribution, then you are guaranteed an immediate return on investment regardless of market fluctuations.

Experts often compare employer choice to "free money" or long-term pay raises and research backs up that value. One study found 43 percent of employees would take a lower salary rather than see their employer's contributions reduced, and the matching maximization mode calculates the optimal employee contribution amount to ensure full employer match is received and no funds are lost.

However, if you make a high percentage of your contributions in the first few months of the year, you may reach the IRS annual limit before the end of the year. In some plans, employer matching stops when employee contributions stop. If you are at the maximum allowed by law for the contribution rate required to receive full match, this mode will warn you.

Annual contribution limits for year 2026.

The IRS sets a limit on the amount employees can deduct and contribute annually from their paychecks, which is increased in line with inflation. Insureds who have reached a certain age may make additional contributions.

The above amounts are for the portion of the employee contribution from their salary. The cap on the sum of both employee and employer contributions is higher at $72,000 (2026 years). The calculator automatically applies age-based maximums to the self-employment deduction in future projections.

The true cost of early repayment

Funds invested in a 401(k) should generally remain in the account until at least age 59½. Early withdrawals are subject to regular income tax on the amount withdrawn, and the IRS usually imposes a 10% penalty.

The payout mode calculates the sum of federal, state and local taxes using the tax rate entered and shows the net amount, including penalties if applicable. After age 59½ there is generally no penalty for early withdrawal. However, there are certain exceptions such as some disabilities, certain medical expenses, and unemployment starting in the year you turn 55. Even with a waived penalty, the loss of future earnings from withdrawing funds can be a higher price to pay.

Occupational pension.

A 401(k) plan is an investment plan. This means that the final amount received will not be fixed as with a traditional pension but will depend on actual contributions and investment performance. The name derives from a section added to the Internal Revenue Code in 1978 by the Revenue Act of 1978.

Because the account balance is a personal asset, it can be taken with you when changing jobs. When leaving an employer there are several choices available: Leave the money in the existing plan, roll over to your new employer's retirement program, convert to an IRA, or take cash out and pay taxes and penalties. There may also be a waiting period before all of the company contributions become fully vested.

Options for payout after leaving the company.

After leaving the company, the account balance must be converted into income. There are several options available: a lump sum withdrawal, establishing regular periodic payments or converting part of it to an annuity policy. A commonly used rule is the 4% rule. About 4% of the account balance will be withdrawn in the first year and then amounts adjusted for inflation thereafter.

The required minimum distribution (RMD) ultimately creates the obligation to begin taking withdrawals. Starting at age 73, a certain minimum amount must be withdrawn annually based on account balance and life expectancy or penalties may apply. The projection mode calculates monthly income that can be taken from an account during retirement as a starting point for planning your retirement savings.

This calculator is for general information and planning purposes only and does not constitute financial or tax advice. Investment returns are not guaranteed, and tax laws are subject to change. Actual results will vary based on market conditions, fees, and the specific terms of the program selected. Please consult a qualified professional before making any decisions regarding your retirement savings or distributions.