Our 401(k) Calculator offers a straightforward method to estimate the long-term growth of your retirement account by your desired retirement date.

Understanding your future 401(k) plan growth can help you adjust your annual contributions to meet your retirement goals.

Your 401(k) Calculator Inputs

To get started, we only require four fields:

1. Current Annual Income: The yearly salary amount you receive as compensation from your employer before taxes and benefit deductions.
2. Years Until Retirement: The number of years until you intend to retire.
3. Current 401(k) Balance: The amount of money in your 401(k) account.
4. Current Before-Tax Contribution: The percentage of your salary, in pre-tax dollars (before taxes on contributions), that you contribute to your 401(k) plan each year. You can select a percentage between 0 and 50%.

The Internal Revenue Service (IRS) rules set 401(k) annual contribution limits—$23,000 for 2024. You can also make additional catch-up contributions if you are 50 or over at the end of the calendar year. For 2024, the catch-up contribution limit is $7,500, for a 401k annual maximum contribution of $30,500.

Advanced Inputs

Expanding the Advanced drop-down menu allows you to enter additional details for a more precise estimate. Providing more information enables you to personalize your results.

• Annual Salary Increases: The expected yearly percentage growth in your salary from now until retirement.
• Pay Period Frequency: How often do you receive a paycheck? Choose from the following options: Weekly (once a week), Bi-weekly (every two weeks), Semi-monthly (twice a month), Monthly (once a month), or Annual (once a year).
• Annual Before-Tax Return On Savings: The annual percentage return you expect to earn on your 401(k) retirement account before taxes.

Your plan administrator, typically your employer, selects both the types of investment options available for your 401(k) plan and the investment firm responsible for managing the funds. With this in mind, your employer should be able to provide you with a historical average annual rate of return for your 401(k) plan over a certain period of time.

Remember that your 401(k) investments involve risk; therefore, past performance does not guarantee future results. Your investment return and principal value of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.

• Employer Match: The percentage of your annual 401(k) contribution that your employer contribution will match and add to your 401(k) retirement account up to a preset employer maximum.
• Maximum Employer Match: This is the maximum percentage of your annual salary that your employer establishes as the upper limit for the matching contribution to your 401(k) plan.

Understanding Your Results

Our Simple 401(k) Estimator provides quick results about your Accumulated Plan Balance at Retirement, your Contributions (out-of-pocket costs), and your Employer Matching Contributions.

Here are the steps to help you understand and act on the information provided:

1. Review Your Coverage Amount

• Understand the Figure: The primary output is the estimated Plan Balance at Retirement, calculated based on your inputs.
• Assess Adequacy: Compare this figure with your current and future financial commitments. Ensure it provides for a secure retirement and covers your expected lifestyle, estimated living expenses, and the number of years you plan to be retired. 2. Examine Assumptions Check inputs: Reviewing data entry is crucial, as minor errors can significantly affect the estimated retirement amount.

2. Examine Assumptions

• Check Inputs: Reviewing data entry is crucial, as minor errors can significantly affect the estimated retirement amount.

3. Consider Different Scenarios

• Adjust Variables: Use the calculator to simulate different scenarios by adjusting the input variables, such as varying savings rates, to see how they impact your estimated plan balance.
• Plan for Contingencies: Consider the impact of unforeseen events, such as a severe illness resulting in medical costs, an economic downturn, or changes to social security.

4. Consult a Professional

• Seek Advice: While 401k calculators provide a good starting point, consulting with a financial advisor can provide deeper insights. They can help refine your plan based on detailed financial planning, an understanding of taxes in retirement, and personal circumstances.
• Review Periodically: Periodically review your retirement plan to confirm you are on track to meet your goals and make adjustments as needed based on shifts in your financial situation or market conditions.

5. Decision Making

• Prioritize Needs: Based on the calculator's estimated balance by retirement and your subsequent research, consider increasing your contributions or adjusting your investment strategy for higher returns if there is a gap in retirement assets.

What Could Your 401(k) Be Worth at Retirement?

Using our 401(k) Growth Calculator, let's run through a quick example. Let's assume the following:

• You are 30 years old right now.
• You have 37 years until you retire.
• You make $50,000/year and expect a 3% annual salary increase.
• Your current 401(k) balance is $10,000.
• You get paid biweekly.
• You expect your annual before-tax rate of return on your 401(k) to be 5%.
• Your employer match is 100% up to a maximum of 4%.
• Your current before-tax 401(k) plan contribution is 5% annually.

Applying these figures to this calculator returns a before-tax total value of your 401(k) retirement account of $795,517 in year 37 before you retire. That's quite an accumulation of savings over 37 years. During that period of investing in your 401(k), your cumulative contributions total $165,436, and your employer's cumulative contributions add up to $132,348.

This example illustrates the growth potential of investing 5% of your salary over several decades into your 401(k) while maximizing the benefit of your employer matching contributions.

How Much Could Your 401(k) Grow if You Stop Contributing?

Now, let's examine what happens to your 401(k) when you stop contributing and your employer does not make matching contributions.

Using most of the same parameters as before, let's use our 401(k) Growth Calculator to see how much your 401(k) will be worth if you stop contributing at age 30 after you have already accumulated $10,000 in your account:

• You are 30 years old right now.
• You have 37 years until you retire.
• You make $50,000/year and expect a 3% annual salary increase.
• Your current 401(k) balance is $10,000.
• You get paid biweekly.
• You expect your annual before-tax rate of return on your 401(k) to be 5%.
• Your employer match is 100% up to a maximum of 4%. (However, because you stop contributing, your employer match amount is now $0 per year.)
• Your current before-tax 401(k) plan contribution is 0% annually.

What happens to your previous 401(k) balance of $795,517? It plummets to $63,485 — $732,032 less than before. When you stop contributing to your 401(k) and have no employer-matching contributions, your total 401(k) balance in year 37 is 92% less.

Procrastinating with your retirement savings — and your 401(k) contributions — means you have to work much harder and save even more to catch up to where you need to be to reach your retirement goals. Learn more about the cost of waiting to save for your retirement.

Factors That Impact Your 401(k) Growth

Effectively growing your 401(k) depends on several key factors that, when understood, can help you make educated decisions about your retirement savings strategy. Here are the main factors that impact 401(k) growth:

Contribution Amount

• Employee Contributions: The amount you regularly contribute to your 401(k) has a direct impact on its growth. Increasing your contribution can significantly enhance your retirement savings over time.
• Employer Matching: Many employers offer matching contributions up to a certain percentage. Maximizing these employer contributions can substantially boost your 401(k).

Investment Choices

• Asset Allocation: The mix of stocks, bonds, and other investment funds in your 401(k) affects its growth potential and risk. A well-diversified portfolio can help manage risk and improve return on investment.
• Fund Performance: The performance of the specific funds you choose can vary. Selecting funds with a strong track record and low fees can enhance growth.

Investment Fees

• Management Fees: Fund managers charge these fees to manage the investment. Lower costs can lead to higher net returns.
• Expense Ratios: The annual fee that all mutual funds or ETFs charge their shareholders can eat into your returns. Choosing funds with lower expense ratios can boost your overall growth.

Market Conditions

• Economic Cycles: Your 401(k) performance is influenced by the overall economic environment, including periods of economic growth or recession.

Time Horizon

• Compound Interest: The longer your money is invested, the more time it has to grow through compound interest. Starting early can significantly enhance the growth of your 401(k).
• Age and Retirement Timeline: The number of years until you retire affects your investment strategy. Younger individuals can typically take more risks, potentially leading to higher returns.

Inflation Rate

• Purchasing Power: Inflation reduces the purchasing power of your savings over time. Investments that outpace inflation are crucial for maintaining the value of your retirement savings.

Tax Implications

• Pre-Tax Contributions: Contributions to a traditional 401(k) are made pre-tax, reducing your taxable income now but taxed upon withdrawal.
• Roth 401(k): Contributions are made with after-tax dollars, but withdrawals are tax-free if certain conditions are met, which can be beneficial if you anticipate being in a higher tax bracket in retirement.

Withdrawal Strategies

• Early Withdrawals: Withdrawing money from your 401(k) before age 59½ can result in penalties and taxes, reducing overall growth.
• Required Minimum Distributions (RMDs): After reaching age 73, you must start taking minimum distributions, which can impact the growth of your remaining balance.¹

Behavioral Factors

• Consistency: Regular and consistent contributions are essential to steady growth.
• Market Timing: Attempting to time the market can lead to missed opportunities and losses. Staying invested and following a long-term strategy is generally more effective.

Loan Provisions

• 401(k) Loans: Some plans allow loans against your 401(k). While this can provide short-term liquidity, it can negatively impact long-term growth if not repaid promptly.

Understanding these factors and how they interact can aid you in making better decisions to maximize the growth of your 401(k) retirement savings plan and secure your financial future.

Benefits of Using a 401(k) Calculator

A 401(k) calculator offers several benefits, making it an invaluable tool for planning your retirement savings. Here are the key advantages:

Personalized Projections

• Future Balance Estimates: A 401(k) calculator can estimate how much your retirement savings might grow over time based on your specific contribution rates, employer matching, and investment returns.
• Retirement Income Estimates: It helps you estimate the monthly or annual income you can expect during retirement, giving you a clearer picture of your financial future.

Contribution Planning

• Optimal Contribution Rates: By adjusting your contribution rates in the calculator, you can find the optimal amount to save each month or year to reach your retirement goals. Take advantage of additional contribution limits.
• Impact of Increasing Contributions: See how increasing your contributions, even by small amounts, can significantly boost your retirement savings.

Employer Matching Maximization

• Matching Contributions: Understand how much your employer's matching contributions can add to your retirement savings and ensure you take full advantage of this benefit.

Investment Strategy Assessment

• Rate of Return: Experiment with different rates of return to see how changes in investment performance might affect your savings.
• Risk Assessment: Assess how different levels of investment risk can impact your retirement savings and adjust your strategy accordingly.

Tax Implications

• Tax-Deferred Growth: See the benefits of tax-deferred growth in a traditional 401(k) and how it can lead to higher retirement savings than taxable accounts.
• Roth 401(k) Analysis: Compare the benefits of a Roth 401(k), which offers tax-free withdrawals, to see which option might be better for your situation.

Inflation Impact

• Purchasing Power: Factor in inflation to understand how it will affect your savings and the purchasing power of your retirement income.

Scenario Analysis

• Different Scenarios: Run various scenarios, such as changes in salary, contribution rates, and retirement age, to see how other factors can influence your retirement savings.
• Market Volatility: Assess how market volatility might impact your savings and prepare for potential fluctuations in investment performance.

Savings Goals Setting

• Goal Achievement: Determine if your current savings strategy is adequate to meet your retirement goals or if adjustments are needed.
• Milestone Tracking: Set and track milestones to ensure you are on the right path to achieving your long-term financial objectives.

Retirement Age Planning

• Optimal Retirement Age: Experiment with different retirement ages to see how retiring earlier or later can affect your savings and retirement income.

Loan & Withdrawal Impact

• Loan Analysis: Understand how taking a loan from your 401(k) can impact your long-term savings and the importance of repaying it promptly.
• Early Withdrawals: Assess early withdrawals' penalties and tax implications and how they can detract from your overall retirement savings.

Behavioral Insights

• Consistency and Discipline: Using a calculator regularly can reinforce the importance of consistent savings and disciplined investing.
• Financial Awareness: It increases your awareness of how different financial decisions affect your retirement outlook, leading to more informed and effective planning.

Frequently Asked Questions

Is a 401(k) a Defined Contribution Plan?

Yes, a 401(k) is a type of defined contribution plan. In a 401(k), employees contribute a portion of their wages to individual accounts up to the annual contribution limits, often with employer-matching contributions. The future benefits depend on the contributions made and the account's investment performance.

What Are the Tax Benefits of a 401(k)?

The tax benefits of a 401(k) include the capability to contribute pre-tax income, which reduces taxable income for the year. Earnings on investments grow tax-deferred until withdrawn, typically at retirement. Additionally, some employers offer Roth 401(k) options, where contributions are completed with after-tax dollars, but withdrawals in retirement are tax-free.

Sources

1. Retirement Topics — Required Minimum Distributions (RMDs) - Internal Revenue Service (IRS). https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds