401k Contribution and Employer Match Calculator

How a 401k balance is actually built

A 401k balance comes from three sources: the money you defer from each paycheck, the money your employer adds through a match, and the compound growth on both. Over a long career the third source usually becomes the largest of the three, but it only exists because of the first two. The order matters, because growth cannot compound on contributions that were never made.

Your contribution is expressed as a percentage of salary and comes out before you see it. Traditional deferrals reduce your taxable income this year and are taxed on withdrawal. Roth 401k deferrals are made with after tax dollars and qualified withdrawals are tax free. This calculator models the gross contribution and does not apply either tax treatment.

The employer match is the highest return available to you

The most common match formula in the United States is 50 percent of what you contribute, up to 6 percent of salary. Some employers match dollar for dollar up to three or four percent. Whatever the shape, the logic is identical: up to a threshold, each dollar you defer is topped up by your employer at a fixed rate.

A 50 percent match is an immediate 50 percent return on that money, before a single day of investment growth. No diversified investment reliably offers that. This is why contributing below the match threshold is one of the few genuinely unambiguous mistakes in personal finance. If your employer matches to 6 percent and you contribute 4 percent, you are declining part of your own compensation. The calculator above says exactly how much per year, so you can see the annual figure rather than an abstract percentage.

Two caveats. First, vesting. Employer contributions may only become permanently yours over a schedule of three to six years, and leaving early can forfeit the unvested portion. Second, some plans require you to be employed on a specific date to receive the match. Read your summary plan description.

The IRS contribution limit

The IRS caps how much an employee can defer each year. The limit is treated in this calculator as a labelled constant so it is easy to check and update, and it should be reviewed annually because the IRS adjusts it for inflation. Employer contributions do not count against the employee deferral limit, though a separate and much higher combined limit applies to both together. People aged 50 and over can contribute an additional catch up amount.

Assumptions that drive the projection

The return assumption has the largest effect on a long projection, and it is also the least knowable. A one percentage point difference over 30 years can change the ending balance by a third or more. Historic long run returns for diversified equity portfolios have often been quoted in the 7 to 10 percent range before inflation, but sequences matter, fees subtract directly, and any given 30 year window can disappoint. Run a conservative figure alongside your optimistic one and treat the gap between them as the honest range.

The salary increase assumption compounds too. Because contributions are a percentage of salary, raises quietly raise your contributions. Many plans offer automatic escalation, which increases the percentage by a point each year, and it is an effective way to save more without a decision every January.

What this model does not include

• Investment fees and fund expense ratios, which reduce net returns.
• Inflation, so results are in future dollars, not today's purchasing power.
• Taxes on withdrawal, loans against the plan, or early withdrawal penalties.
• Required minimum distributions once you reach the applicable age.

This page explains how the arithmetic works and is not advice about your plan, your investment choices or your tax position. Speak with a qualified financial or tax professional before making changes, and see our terms of use for the full disclaimer.