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A 401(k) is an employer-sponsored retirement plan that allows employees to contribute a portion of each paycheck. Many employers also match a certain amount of employee contributions. Typically, 401(k) plans are tax-deferred, meaning the money you contribute isn’t taxed until you withdraw from your account.
Our 401(k) calculator below can help you determine what your 401(k) balance will be when you retire.
The 401(k) calculator estimates how much money you will have in your 401(k) by retirement based on your age, current balance, amount you contribute, and employer match. It can help you determine when you will be financially ready for retirement.
In the fields above, use the toggle to adjust the numbers based on your personal information and 401(k) account. Click “Calculate” to see your future balance. You will also be able to see your total contributions and total employer match contributions.
Remember that taxes don’t get factored into this 401(k) calculator. The taxes you’ll pay on your 401(k) depend on the tax bracket you’re in when you withdraw from your account. Additionally, check that you aren’t contributing more than the current IRS contribution limits. For 2023, the contribution limits are $22,500 or $30,000 if you’re above age 50.
Below are the definitions of the investing terms referenced in the 401(k) calculator:
A 401(k) is a retirement savings account employers specifically offer as part of a company’s benefits plan. Employees contribute a portion of each paycheck to their 401(k) account, and often, employers match a portion of employee contributions.
You don’t pay taxes on the money that you initially contribute. Once you turn 59 ½, your withdrawals will get taxed as ordinary income. You will incur a 10% tax penalty if you withdraw money from your 401(k) before you reach age 59 ½. To avoid this, make sure you have an emergency fund for shorter-term expenses.
401(k) plans allow you to invest in exchange-traded funds (ETFs), mutual funds, and target-date funds. When maximizing your 401(k), it’s important to have an investment strategy. You can work with a retirement adviser to help create a strategy that works for you.
There are two main benefits of investing in a 401(k). The first advantage is that 401(k) plans are tax-deferred, meaning you don’t pay taxes until you withdraw your savings. This lowers your current taxable income. For example, if you currently make $60,000 and contribute 10% of your salary to a 401(k), you are reducing your taxable income by $6,200. As a result, you’ll only get taxed on $54,000 instead of your full salary. This is beneficial because you will likely be in a lower tax bracket after you retire.
The second main benefit of contributing to a 401(k) is the employer matching contribution, meaning that your company contributes a certain amount of money to your 401(k) based on the amount you contribute. The percentage that your company matches, if at all, depends on your specific employer. The most common 401(k) matching formula is 50 cents on the dollar, up to 6% of an employee’s salary.
Below, we’ve answered some common questions regarding 401(k) retirement plans.
The amount of money you should have saved in your 401(k) depends on your age. For example, by age 30, you should have the equivalent of your annual salary in your 401(k). Some experts recommend you have 10 times your annual salary by age 67.
Most financial experts recommend contributing 10–15% of your income to a retirement plan. In the U.S., individuals contribute a median of 12% of their salary.
To find out how much your 401(k) will be worth in 10 years, plug your specific information into the above 401(k) calculator and set your retirement age as your age 10 years from today.
As you can see, contributing to a 401(k) can allow you to invest your money easily. It’s important to note that while a 401(k) has many benefits, it’s not the only way to save for retirement. Other ways to prepare for retirement include paying off debt, following a budget, and improving your credit score.
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