401(k) Calculator
Frequently Asked Questions
What is a 401(k)?
A 401(k) is a retirement savings plan sponsored by employers:
- Contributions are deducted directly from your paycheck
- Traditional 401(k) contributions are pre-tax, reducing your taxable income
- Roth 401(k) contributions are after-tax but grow tax-free
- Many employers offer matching contributions as part of your benefits
- Funds typically cannot be withdrawn before age 59.5 without penalties
How does employer matching work?
Employer matching is essentially free money for your retirement:
- Common match: 50% of contributions up to 6% of salary
- Example: If you earn $75,000 and contribute 6% ($4,500), employer adds $2,250
- Always contribute at least enough to get the full employer match
- Match formulas vary by company - check your benefits package
- Some employers have vesting schedules for matching contributions
What are the 401(k) contribution limits?
The IRS sets annual limits on 401(k) contributions:
- 2024 employee contribution limit: $23,000
- Catch-up contribution (age 50+): Additional $7,500
- Total limit (employee + employer): $69,000 or 100% of compensation
- Limits are adjusted annually for inflation
- These limits apply across all your 401(k) accounts combined
When should I start saving for retirement?
The best time to start saving is as early as possible:
- Compound interest works best over longer time periods
- Starting at 25 vs 35 can result in significantly more savings
- Even small contributions early on can grow substantially
- Don't miss out on employer matching - it's a 50-100% instant return
- If you haven't started yet, start now - every year counts