How this 401(k) Calculator Works
A 401(k) is a powerful retirement savings vehicle because it combines your personal contributions, free money from your employer (matching), and compound interest. This calculator projects your future account balance by calculating the monthly growth of these three factors over the years until your retirement age.
Future Value = (Current Balance × Growth) + (Monthly Contributions × Growth Annuity)
The calculation assumes that:
- Contributions are made monthly.
- The annual rate of return is compounded monthly.
- Your salary remains constant for the projection (or you can update it manually as you get raises).
Definition of Terms
Contribution %
The percentage of your gross annual salary that you choose to deduct from your paycheck and deposit into your 401(k).
Employer Match
The percentage of your specific contribution that your company matches. For example, if you contribute $100 and the match is 50%, the company adds $50.
Match Limit
The cap on the employer's matching. Usually expressed as "50% match up to 6% of salary." This means the employer stops matching once your contributions exceed 6% of your salary.
Step-by-Step Instructions
- Current Details: Enter your current age, planned retirement age, and the total amount currently in your 401(k).
- Salary & Contribution: Input your annual gross salary and the percentage you plan to contribute.
- Employer Match: Check your benefits handbook. Enter how much they match (e.g., 50% or 100%) and the limit (e.g., up to 6%).
- Rate of Return: Enter an estimated annual return. The stock market average is often cited around 7-10%, while conservative estimates might be 4-6%.
- Analyze: Review the graph to see how much of your final nest egg comes from your savings versus the "free money" from interest and employer matching.