How a 401K grows
Every paycheck, a fixed percentage of your salary is deducted (pre-tax) and deposited into your 401K. Many employers match a portion — for example, 50% of the first 6% you contribute. That match is free money, added to your account on top of your contribution.
The combined total is invested (usually in mutual funds) and compounds every year at the expected rate of return.
2024 IRS contribution limits
| Limit | Amount |
|---|---|
| Employee contribution (under 50) | $23,000 |
| Employee contribution (50+, catch-up) | $30,500 |
| Total (employee + employer) | $69,000 |
This calculator does not automatically cap your contribution at the IRS limit. Be mindful when entering high percentages on high salaries.
FAQ
What if I change jobs?
Your 401K is portable. You can roll it into your new employer's 401K or into a traditional IRA — both without triggering taxes. Cashing it out before age 59½ triggers income tax plus a 10% penalty.
Traditional vs Roth 401K?
Traditional: pre-tax contributions, taxed on withdrawal. Roth: after-tax contributions, tax-free on withdrawal. Choose Roth if you expect higher taxes in retirement, Traditional if lower.
When can I withdraw?
Starting at age 59½, no penalty. Required Minimum Distributions (RMDs) begin at age 73. Early withdrawal (before 59½) triggers a 10% penalty plus income tax.