401k Contribution Calculator

What Is a 401k?

A 401k is an employer-sponsored retirement savings plan that lets you contribute pre-tax (Traditional) or after-tax (Roth) dollars, with the invested funds growing tax-advantaged. Contributions reduce your current taxable income (Traditional) or grow tax-free (Roth). In 2025, the IRS contribution limit is $23,500, with an additional $7,500 catch-up contribution allowed for workers aged 50 and older.

Why Employer Match Is the Best Return in Investing

If your employer matches 100% of contributions up to 6% of salary, that's an immediate 100% return on that portion of your contribution — before any investment gains. No stock, bond, or real estate investment can reliably guarantee that. Not contributing enough to capture the full employer match is effectively leaving a portion of your compensation on the table. Always contribute at least enough to get the full match before considering other investment accounts.

Traditional vs Roth: The Core Decision

Traditional contributions reduce your taxable income now, but withdrawals in retirement are taxed as ordinary income. Roth contributions offer no upfront tax benefit, but qualified withdrawals in retirement are completely tax-free. The key question: will your tax rate be higher now or in retirement? If you're in a lower bracket now and expect to be in a higher bracket in retirement (common for young, early-career workers), Roth is typically better. If you're in a peak earning year and expect a lower retirement tax rate, Traditional often wins.

When to Prioritize 401k vs IRA vs Taxable Account

A common priority order: (1) Contribute to 401k up to the employer match — guaranteed return. (2) Max out an IRA (Traditional or Roth) for more flexibility and investment options. (3) Return to 401k to maximize contributions up to the IRS limit. (4) Use taxable brokerage accounts for additional savings. This order can shift based on your plan's investment options, fees, and income level for Roth IRA eligibility.