Free 401(k) Calculator with Employer Matching

A 401(k) is a tax-advantaged retirement savings plan offered by many American employers. Named after a section of the U.S. Internal Revenue Code, it allows employees to save and invest a portion of their paycheck before taxes are taken out. The money grows tax-deferred until withdrawal at retirement, when it's taxed as ordinary income.

Introduced in 1978 and popularized in the 1980s, 401(k) plans have become the primary retirement savings vehicle for millions of Americans, largely replacing traditional pension plans. The key advantage is that contributions reduce your taxable income today while building wealth for tomorrow—a powerful combination for long-term wealth building.

Most 401(k) plans offer a variety of investment options including mutual funds, index funds, target-date funds, and sometimes company stock. Your contributions are automatically deducted from your paycheck, making saving effortless and consistent—often called "paying yourself first."

Many employers now offer both Traditional and Roth 401(k) options, which differ in tax treatment:

Employer matching contributions always go into a Traditional 401(k) account (pre-tax), regardless of whether you contribute to Traditional or Roth. Many financial advisors recommend a mix of both: contribute enough to Traditional to maximize employer match, then consider Roth for additional contributions, especially if you're young and in a lower tax bracket.

Employer matching is when your company contributes money to your 401(k) based on how much you contribute. This is literally free money—an instant 50% to 100% return on your investment before any market gains. Never leave employer matching on the table!

Vesting schedules determine when employer contributions become fully yours. Immediate vesting means it's yours right away. Graded vesting (e.g., 20% per year over 5 years) means you earn ownership over time. Cliff vesting (e.g., 100% after 3 years) means you get nothing until you reach the threshold, then it's all yours. Check your plan's vesting schedule—it affects job change decisions.

Action item: At minimum, always contribute enough to get the full employer match. If your employer matches 50% on first 6%, contribute at least 6%. Anything less is declining free money—equivalent to rejecting a 3% salary increase!

The IRS sets annual limits on how much you can contribute to your 401(k). These limits are adjusted periodically for inflation. Understanding these limits helps you maximize tax-advantaged savings:

Catch-up contributions are specifically designed for people age 50 and older who may have started saving late or want to accelerate retirement savings in their final working years. The additional $7,500 can make a significant difference—over 10 years at 7% return, that extra $7,500/year grows to approximately $103,500 in additional retirement savings.

The combined limit ($69,000 or $76,500 for 50+) includes employee contributions, employer matching, profit-sharing, and other employer contributions. This limit rarely affects average workers but matters for highly compensated employees or those with very generous employer contributions.

401(k) accounts have specific rules governing when and how you can access your money. Understanding these rules helps you avoid costly penalties and plan effectively:

Job changes: When you leave a job, you can typically: (1) leave money in your old 401(k), (2) roll it over to your new employer's 401(k), (3) roll it into an IRA (often the best option for more investment choices and lower fees), or (4) cash out (strongly discouraged due to taxes and penalties). Rolling over preserves tax advantages and keeps your retirement savings on track.