Calculate your 401k retirement savings growth with employer match. See how much you'll have at retirement.
Understanding Your 401k
A 401k is an employer-sponsored retirement savings plan that offers tax advantages. Contributions reduce your taxable income, and investments grow tax-deferred until retirement.
401k Contribution Limits (2025)
- Under 50: $23,000 annual limit
- Age 50+: $30,000 annual limit ($23,000 + $7,000 catch-up)
- Total Limit: $69,000 including employer match (under 50)
Employer Match - Free Money!
Never leave employer match on the table - it's guaranteed 100% return! Common match formulas:
- Dollar-for-dollar: 100% match up to 3-6% of salary
- 50 cents per dollar: 50% match up to 6% of salary
- Partial match: 100% on first 3%, 50% on next 2%
Example: $60k salary, 6% contribution ($3,600), 50% employer match = $1,800 free money!
Vesting Schedule
Employer contributions may have a vesting schedule before you own them fully:
- Immediate: 100% vested from day one (best)
- Graded: 20% per year over 5 years
- Cliff: 0% until 3 years, then 100%
401k Strategies
Always Get Full Match
Contribute at least enough to get full employer match. It's an instant guaranteed return that beats any investment.
Increase Contributions Over Time
Start with match, then increase 1% annually until hitting 15-20% total. Many plans offer automatic annual increases.
Traditional vs Roth 401k
Traditional: Pre-tax contributions, taxable withdrawals. Good if you expect lower tax bracket in retirement.
Roth: After-tax contributions, tax-free withdrawals. Good for younger workers or those expecting higher future taxes.
Investment Allocation
- Young (20s-30s): 90% stocks, 10% bonds - aggressive growth
- Middle (40s-50s): 70% stocks, 30% bonds - balanced
- Near Retirement (60s): 50% stocks, 50% bonds - conservative
Rule of thumb: Bond allocation = your age. At 30, hold 30% bonds and 70% stocks.
Frequently Asked Questions
How much should I contribute to my 401k?
Minimum: enough to get full employer match (typically 3-6% of salary). Ideal: 15-20% of gross income for comfortable retirement. If you can't afford 15%, start with the match and increase 1% annually.
What happens to my 401k if I leave my job?
You have 4 options: 1) Leave it with old employer (if balance >$5k), 2) Roll over to new employer's 401k, 3) Roll over to IRA (most flexible), 4) Cash out (worst option - taxes + 10% penalty if under 59.5).
Can I withdraw from my 401k early?
Yes, but you'll pay income tax plus 10% penalty if under 59.5. Some exceptions: disability, medical expenses >7.5% of AGI, first-time home purchase (limited). Better option: 401k loan if available (borrow from yourself, pay yourself back with interest).
Should I do Traditional or Roth 401k?
Traditional if: you're in high tax bracket now, expect lower bracket in retirement. Roth if: you're young/early career, expect higher future taxes, want tax-free retirement income. Many do mix of both (hedge your bets).
What's a good rate of return for 401k?
Historical stock market average is 10% annually. Conservative planning uses 6-8% to account for inflation and market volatility. Your actual return depends on investment allocation and market conditions.
When can I start withdrawing from 401k?
Penalty-free withdrawals start at 59.5. Required Minimum Distributions (RMDs) start at 73 (as of 2025). Between 59.5-73, you can withdraw as much or little as you want, paying ordinary income tax on traditional 401k withdrawals.
How much will I have in 401k at retirement?
Depends on contributions, match, returns, and time. Example: $60k salary, 6% contribution + 3% match, 7% return, 35 years = ~$865,000. Starting early is key - 10 extra years can double final amount!
Should I max out 401k or pay off debt?
Always get employer match first (it's free money). Then pay off high-interest debt (>7%). For low-interest debt (mortgage 3-5%), you can do both - max 401k and pay minimum on debt, since investment returns likely exceed interest rate.
