A 401(k) is the most powerful retirement tool most workers have access to, combining tax advantages with free employer money. This calculator shows how your contributions, your employer match, and decades of compound growth build into a retirement balance.
How contributions and matching work
You choose a percentage of each paycheck to contribute, and many employers match a portion — a typical formula is 50% of your contributions up to 6% of salary. On a $60,000 salary, contributing 6% ($3,600) earns you an extra $1,800 from your employer every year. That match is an immediate, guaranteed return you cannot get anywhere else.
2026 contribution limits
For 2026 you can contribute up to $24,500 of your own money, and if you are 50 or older you can add an $8,000 catch-up contribution for a total of $32,500 (savers aged 60 to 63 may be allowed a larger $11,250 catch-up). Employer matching contributions do not count against these limits, so your total account additions can be considerably higher.
A worked example
Contributing $500 a month with a $250 monthly employer match — $750 total — at a 7% return over 30 years grows to roughly $850,000. Without the match, the same personal contribution reaches about $565,000. The match alone accounts for nearly $285,000 of the difference.
Getting the most from your 401(k)
- Always contribute at least enough to capture the full employer match before investing elsewhere.
- Choose low-cost index funds if available; expense ratios directly reduce your long-term balance.
- Consider a Roth 401(k) if your employer offers it and you expect higher taxes in retirement.
- Avoid cashing out when you change jobs — roll the balance into a new 401(k) or IRA to keep it growing tax-deferred.
2026 401(k) contribution limits
| Limit | 2026 amount |
|---|---|
| Employee elective deferral | $24,500 |
| Catch-up, age 50+ | $8,000 (total $32,500) |
| Enhanced catch-up, ages 60–63 | $11,250 (total $35,750) |
| Total employee + employer additions | $72,000 |
Starting in 2026, workers whose prior-year Social Security wages from the employer exceeded $150,000 must make any catch-up contributions as Roth (after-tax) contributions rather than pre-tax. Regular deferrals up to $24,500 can still be pre-tax if your plan allows.
Worked example: why the match matters
Consider a 35-year-old earning $70,000 whose employer matches 50% of contributions up to 6% of pay. The table assumes a 7% average annual return, contributions spread monthly, and a flat salary for simplicity (raises would make every figure larger).
| Employee contributes | Employer adds | Yearly total | Balance at 65 |
|---|---|---|---|
| 3% ($2,100) | $1,050 | $3,150 | about $320,000 |
| 6% ($4,200) | $2,100 | $6,300 | about $640,000 |
| 6%, no match | $0 | $4,200 | about $427,000 |
Contributing 6% instead of 3% costs this worker $2,100 a year before tax, less after the tax savings, yet it doubles the projected balance, because the extra contribution also unlocks an extra $1,050 of employer money every year. The match is effectively an instant 50% return on those dollars, which is why most planners suggest contributing at least enough to capture the full match before paying extra on low-rate debt or investing elsewhere.
Traditional or Roth 401(k)?
Traditional contributions reduce your taxable income today and are taxed when withdrawn. Roth contributions are made after tax, but qualified withdrawals in retirement are tax-free. A common rule of thumb: favor traditional if you expect a lower tax rate in retirement than you pay now, and favor Roth if you are early in your career or expect your rate to rise. Many people split contributions between both to diversify their future tax exposure.
- Check your vesting schedule. Employer contributions may not be fully yours until you have worked a certain number of years.
- Watch fund expense ratios. Over 30 years of steady contributions, a 1% annual fee versus 0.1% can shrink your ending balance by more than 10%.
- Increase your rate by 1% each year or with every raise so the change is barely noticeable in your paycheck.
What happens when you change jobs
Your 401(k) balance stays yours when you leave an employer, though unvested employer contributions may be forfeited. You generally have four choices: leave the money in the old plan (if the balance is large enough), roll it into your new employer’s plan, roll it into an IRA, or cash it out. Cashing out is usually the costliest option, since the withdrawal is taxed as ordinary income and, if you are under 59½, typically hit with a 10% early-withdrawal penalty. A direct rollover, where the money moves straight from one custodian to another, avoids mandatory withholding and keeps the full balance compounding.