How this works
A 401(k) is the dominant US workplace retirement account: pre-tax money goes in, grows tax-deferred for decades, and you pay income tax only on withdrawals. The combination of tax deferral, automatic payroll deduction, and (for most plans) an employer match makes 401(k)s the single highest-return savings vehicle most American workers have access to. The math is just compound interest with monthly contributions, but the variables that drive end-balance — contribution rate, employer match, return assumption, time horizon — produce wildly different outcomes from defensible defaults, which is why understanding the inputs matters.
The employer match is the highest-priority lever. A common structure is "50% match up to 6% of salary" — meaning if you contribute 6% the employer adds 3%, but if you contribute only 2% they add only 1%. Failing to capture the full match is leaving free money on the table, and it's a 50% (or 100% for richer matches) instant return on the matched portion — there is no investment that beats this. The first 401(k) goal for any worker should be: contribute at least enough to get the full employer match. After that, the next priorities (in roughly this order) are: pay off high-interest debt, build a 3-6 month emergency fund, then maximise tax-advantaged contributions (401k + IRA up to legal limits, currently $23,000/year and $7,000/year respectively for under-50s in the US).
For return assumptions, 7% nominal is the standard defensible long-run figure for a diversified equity-heavy portfolio (the post-WWII US stock market average is closer to 10% nominal, ~7% real after inflation; 7% nominal is conservative). Don't assume more — overestimating the return understates how much you need to save and produces a nasty surprise at retirement. The 4% safe-withdrawal rule (from the Trinity Study) lets you back out a sustainable retirement income: a $1M balance supports about $40,000/year, or $3,300/month, in today's purchasing power, with a 95%+ chance of not running out over a 30-year retirement. The calculator surfaces both the projected end balance and the implied 4%-rule monthly income, because the income figure is what actually matters when planning quality of life in retirement.
The formula
employee_pct is the percentage of salary you contribute. employer_match_pct is what your employer adds for each dollar you contribute (e.g. 50% means $0.50 per $1 you contribute). match_up_to_pct is the cap on your contribution that earns match (e.g. 6% — anything you contribute above 6% gets no match). annual_return assumes a constant rate; reality fluctuates but a 7% nominal long-run assumption is widely defensible.
Example calculation
- A 30-year-old earns $80,000/year and currently has $40,000 in their 401(k). They contribute 10% of salary; their employer matches 50% up to 6% of salary. They assume 7% annual return and plan to retire at 65.
- Monthly contribution = (80,000 / 12) × 10% = $666.67. Match = (80,000 / 12) × 6% × 50% = $200/month. Combined monthly = $866.67.
- Over 35 years (age 30 → 65) at 7% annual return compounded monthly: starting 40,000 grows to about 449,000; 35 × 12 contributions of 866.67 plus growth contribute another ~1,500,000. Final balance ≈ $1.95 million.
- Applying the 4% safe-withdrawal rule: 1.95M × 4% = $78,000/year, or about $6,500/month in retirement. That's close to a 7% replacement of pre-retirement gross — solid for someone who saved consistently from age 30.
Frequently asked questions
Should I prioritise 401(k) contributions or paying off student loans first?
Capture the full employer match first — that's a 50%+ instant return that no debt payoff can match. After that, compare your loan rate to your expected portfolio return: if you're paying 8%+ on loans, paying them down is a guaranteed return that beats stock-market expectations; if you're below 5% (typical federal student loan), the math favours investing in the 401(k) on average. The middle 5-7% range is a judgment call that depends on your risk tolerance and how much the debt weighs on you psychologically. Most personal-finance advisors recommend a hybrid: enough 401(k) to get the full match, then aggressive debt payoff, then ramp 401(k) back up once high-interest debt is gone.
What's the difference between a Traditional 401(k) and a Roth 401(k)?
When you pay tax. Traditional 401(k) contributions are pre-tax (lower your taxable income today, but withdrawals in retirement are taxed at your future ordinary-income rate). Roth 401(k) contributions are post-tax (no tax deduction today, but withdrawals are tax-free in retirement). The right choice depends on whether your tax rate today is higher or lower than what you expect in retirement. Higher today (typical for late-career, peak-earning years) → Traditional is better. Lower today (typical for early-career or low-income years) → Roth is better. Many planners recommend a mix to hedge against future tax-rate uncertainty. The employer match always goes into a Traditional bucket regardless — that's a federal rule.
How do 401(k) contribution limits work?
In 2026, the IRS lets employees contribute up to $23,500/year to a 401(k) (with a $7,500 "catch-up" for people 50+). The combined employer + employee total is capped at $70,000/year. These limits apply across all your 401(k)s if you have more than one — you can't double up by changing employers mid-year. The employee limit is per-person across employers; the employer-side limit is per-employer. Limits adjust for inflation roughly annually. If you exceed the employee limit, the excess gets refunded plus tax penalty — payroll systems usually catch this automatically, but high earners with multiple 401(k)s in one year (e.g. job switch) need to monitor manually.