401(k) calculator.

Traditional vs Roth 401(k)

The two versions differ on when you pay tax. A traditional 401(k) is funded with pre-tax money: contributions lower your taxable income now, and withdrawals in retirement are taxed as ordinary income. A Roth 401(k) is funded with after-tax money: no deduction today, but qualified withdrawals in retirement, including all the growth, come out tax-free.

The rule of thumb: expect a lower tax bracket in retirement and the traditional version usually wins; expect the same or higher, and the Roth is attractive. You can split contributions between both as long as the combined total stays within the $24,500 limit. Younger savers in lower brackets often lean Roth; higher earners often prefer the upfront deduction.

Vesting: when the match is really yours

Your own contributions are always 100% yours, immediately. The employer match can come with a vesting schedule. With graded vesting you own a growing share of the matched money each year, commonly reaching 100% after about four to six years. With cliff vesting you own none of it until a set date, then all of it at once.

Leave before you are fully vested and you forfeit the unvested portion of the employer money. If a job move is on the table, check your plan’s schedule first; the timing of a resignation can be worth thousands of dollars.

How the money is invested, and what fees cost

Inside a 401(k) you pick from a menu chosen by your employer, typically index funds, mutual funds and target-date funds. A target-date fund is the usual default: pick the year closest to your retirement and it shifts from stocks toward bonds as you age. Broad, low-fee index funds are prized because costs compound just like returns: a fund charging 1% a year instead of 0.1% can quietly consume a meaningful slice of the final balance over a career.

The expected return you enter above should reflect that mix: stock-heavy portfolios justify a higher assumption, conservative mixes a lower one. The investment calculator lets you test a portfolio outside the 401(k) wrapper with the same math.

Early withdrawals, the penalty, and the rule of 55

Take money out before age 59½ and you normally owe ordinary income tax plus a 10% early-withdrawal penalty. The IRS lists exceptions that remove the penalty, though tax can still apply: the rule of 55 (leaving your employer in or after the year you turn 55), permanent disability, certain large medical expenses, substantially equal periodic payments under rule 72(t), and qualified domestic relations orders, among others.

Even when no penalty applies, the bigger cost is invisible: dollars withdrawn early lose all their future compounding, which late in a career is most of what they would ever have earned. Loans and hardship withdrawals exist in many plans, but both shrink the balance that the whole projection depends on.

RMDs: required minimum distributions

Tax deferral does not last forever. From age 73, the IRS requires minimum annual withdrawals from a traditional 401(k), sized by your balance and a life-expectancy factor; the IRS RMD rules set the details. Missing one carries a 25% excise tax on the amount not taken, reduced to 10% if corrected within two years.

Roth money escapes the problem: Roth 401(k) balances rolled into a Roth IRA have no RMDs during your lifetime, one reason many retirees make that rollover. If you are still working at 73 and do not own a large share of the company, you can usually delay RMDs from your current employer’s plan until you actually retire.

Changing jobs: four options for the old account

When you leave an employer you can usually leave the money in the old plan, move it into the new employer’s plan, roll it into an IRA, or cash it out. A direct rollover to an IRA or the new plan moves the money with no tax due and keeps it compounding. Cashing out is almost always the worst option before 59½: income tax, the 10% penalty, and the permanent loss of the future growth, all at once.

Avoid having the check made out to you personally; an indirect rollover triggers 20% withholding and a 60-day deadline to redeposit the full amount. Ask for trustee-to-trustee transfer and the problem never arises.

How much should you contribute?

A common target is to save about 15% of income for retirement, counting the employer match toward it. If that is out of reach today, start at the full-match threshold and raise your rate one percentage point with every pay rise, so take-home pay never visibly drops. The math rewards persistence: on a $60,000 salary, just one extra percentage point ($600 a year) at a 7% return adds about $82,900 over 35 years.

Where the 401(k) fits among other accounts: contribute to the full match first, since nothing beats guaranteed money; many savers then fund an IRA for its wider investment choice, and return to the 401(k) with anything left, up to the annual limit. Your contribution comes off the top of your gross salary, so a traditional contribution costs less take-home than its face value.

401(k) vs IRA

Both are tax-advantaged retirement accounts. A 401(k) comes through an employer, takes up to $24,500 of your own money in 2026, and may include a match; the trade-off is a limited investment menu. An IRA is opened by you at any broker, holds anything the broker offers, but takes only $7,500 in 2026 ($8,600 from age 50). They stack: most people who can fund both, should.

The decision that matters is order, not either-or: match first, then IRA, then back to the 401(k). The IRA calculator models the second account with the same compounding engine as this page.

Compounding does the heavy lifting

Each year your balance earns a return, and the next year that return earns its own return, so the curve bends upward rather than rising in a straight line. A 401(k) amplifies the effect twice over: the money grows untaxed along the way, and the match enlarges the base that compounds. That is why the default projection shows $799,394 of growth on only $189,000 of combined contributions.

The practical consequence: a dollar contributed in your twenties can be worth several of the same dollar contributed in your fifties. The compound interest calculator isolates the mechanism if you want to see it bare.

The five expensive mistakes

First, contributing below the match threshold, which forfeits guaranteed money every single year. Second, cashing out when changing jobs instead of rolling over, paying tax and penalty to destroy future growth. Third, sitting in cash or an ultra-conservative mix for decades while inflation erodes it. Fourth, ignoring fund fees, the silent percentage that compounds against you. Fifth, borrowing from the plan and then leaving the job, which can turn the loan into a taxed and penalized distribution.

None of them require expertise to avoid, only knowing they exist. A separate emergency fund prevents most forced withdrawals in the first place.