401k.calculator

401(k) Contribution & Growth Calculator

Current Age:

Target Retirement Age:

Current 401(k) Balance: $

Annual Contribution: $

Annual Contribution Increase (%): %

Expected Annual Return: %

Expected Annual Inflation: %

Projected 401(k) Balance at Retirement

$0.00

(In today's dollars)

Understanding Your 401(k) Growth

A 401(k) is a powerful retirement savings plan offered by many employers. It allows you to save and invest a portion of your paycheck before taxes are taken out. This calculator helps you project the potential growth of your 401(k) balance over time, considering your current savings, contributions, expected investment returns, and the impact of inflation.

The calculation uses a compound interest formula to estimate the future value of your investments. Compound interest is essentially earning interest on your initial investment and on the accumulated interest from previous periods. This "snowball effect" is a key driver of long-term wealth accumulation.

How the Calculator Works:

The calculator simulates year-by-year growth. For each year, it performs the following steps:

Adjust Contributions: Your annual contribution is increased by the "Annual Contribution Increase" percentage you specified.
Add Contributions to Balance: The adjusted annual contribution is added to your current balance.
Calculate Investment Growth: The total balance (previous balance + contributions) is multiplied by (1 + Expected Annual Return / 100) to calculate the gross growth for the year.
Account for Inflation: The projected balance at retirement is then adjusted for inflation to show its purchasing power in today's dollars. This is done by discounting the future value back to the present using the expected annual inflation rate.

Key Inputs Explained:

Current Age: Your age today. This is used to determine the number of years until retirement.
Target Retirement Age: The age at which you plan to stop working and start drawing from your retirement savings.
Current 401(k) Balance: The total amount you already have saved in your 401(k) account.
Annual Contribution: The total amount you plan to contribute to your 401(k) over a year. This is typically a percentage of your salary, but here we use a direct dollar amount.
Annual Contribution Increase (%): The yearly percentage by which you plan to increase your contribution amount. This is crucial for keeping pace with salary increases and maximizing savings.
Expected Annual Return (%): The average annual percentage growth you anticipate from your 401(k) investments over the long term. This is an estimate and actual returns can vary significantly.
Expected Annual Inflation (%): The average annual rate at which the general level of prices for goods and services is rising and subsequently, purchasing power is falling. This helps understand the "real" value of your savings in the future.

Important Considerations:

This is a projection, not a guarantee. Investment returns are not fixed and can fluctuate.
Employer Match: This calculator does not explicitly include employer matching contributions. If your employer offers a match, your actual savings could be significantly higher.
Taxes: Traditional 401(k) withdrawals in retirement are typically taxed as ordinary income. This calculator projects the pre-tax balance.
Contribution Limits: Be aware of annual IRS limits for 401(k) contributions.
Investment Choices: The "Expected Annual Return" depends heavily on the investment options you choose within your 401(k).

401k Calculator

Choose a Calculation401k Retirement Projection

Current Age:

Retirement Age:

Current 401k Balance: $

Annual Salary: $

Contribution Rate: %

Employer Match: %

Up to % of Salary:

Expected Return: %

Show Annual Progression Table

Result:

Estimated Balance at Retirement:
$0.00

Total Personal Contributions: $0.00

Total Employer Match: $0.00

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Calculator Use

The 401k calculator is an essential financial planning tool designed to help employees estimate the future value of their retirement savings. By entering details about your current financial status and future contribution plans, this calculator projects how much you will have saved by the time you reach retirement age.

Understanding the impact of compound interest and employer matching can significantly alter your retirement strategy. Use this tool to experiment with different contribution rates and see how even a 1% increase can change your long-term outcome.

Current Age & Retirement Age: These define your investment horizon. The longer the time between these two ages, the more time your money has to grow through compounding.
Annual Salary & Contribution Rate: Your contribution is usually a percentage of your gross salary. Most experts recommend contributing at least enough to get the full employer match.
Employer Match: Many companies match a portion of your contributions (e.g., 50% of the first 6% you contribute). This is essentially a "guaranteed return" on your investment.

How It Works

The 401k calculator uses the principle of future value of an annuity combined with the future value of a single sum. Because 401k contributions are typically made every pay period, the math assumes an annual compounding effect for simplicity in this projection.

Future Value = [P(1 + r)^n] + [PMT × (((1 + r)^n - 1) / r)]

P: Current 401k balance
r: Annual expected rate of return
n: Number of years until retirement
PMT: Total annual contribution (Personal + Employer Match)

Calculation Example

Example: Let's say Sarah is 30 years old and plans to retire at 65. She has $10,000 in her 401k, earns $50,000 a year, and contributes 6%. Her employer matches 50% up to that 6%. She expects a 7% annual return.

Step-by-step projection for Year 1:

Sarah's Contribution: $50,000 × 0.06 = $3,000
Employer Match: $3,000 × 0.50 = $1,500
Total Year 1 Contribution: $4,500
Beginning Balance: $10,000
End of Year Balance: ($10,000 + $4,500) × 1.07 = $15,515
This process repeats for 35 years, with the balance compounding each year.

Common Questions

How much should I contribute to my 401k?

Most financial advisors recommend contributing at least 10% to 15% of your gross income toward retirement. At a minimum, you should contribute enough to receive the full employer match, as this is immediate 100% or 50% return on your money.

What is a realistic rate of return for a 401k?

Historically, the S&P 500 has averaged about 10% annually before inflation. However, for a 401k calculator, many people use a more conservative estimate of 6% to 8% to account for inflation and a mix of bonds/stocks as they age.

What are the 2024 401k contribution limits?

For 2024, the individual contribution limit for a 401k is $23,000. If you are 50 or older, you can make an additional "catch-up" contribution of $7,500, bringing your total to $30,500.