401(k) Calculator — Project Your Retirement Balance

401(k) Complete Guide — Contribution Limits, Employer Match, and Retirement Projection

A 401(k) is the most powerful retirement savings tool available to most American workers. Named after section 401(k) of the Internal Revenue Code, it lets you contribute pre-tax (or Roth after-tax) dollars from your paycheck into an investment account that grows tax-advantaged until retirement. Understanding how to maximise it — especially the employer match — can mean hundreds of thousands of additional dollars in retirement.

401(k) contribution limits for 2025

In 2025, employees can contribute up to $23,500 of their own salary to a 401(k) plan. The combined employee and employer contribution limit is $70,000. Age-based catch-up contributions are available: employees aged 50–59 and 64+ can contribute an additional $7,500 for a total of $31,000. Employees aged 60–63 benefit from the SECURE 2.0 "super catch-up" of $11,250, for a total of $34,750, if their plan allows it.

401(k) contribution limits for 2026

For 2026, the employee contribution limit increases to $24,500. The combined limit rises to $72,000. The standard catch-up contribution for ages 50–59 and 64+ increases to $8,000 (total $32,500). The super catch-up for ages 60–63 remains $11,250 (total $35,750). Additionally, a major SECURE 2.0 rule takes effect in 2026: employees who earned $150,000 or more in prior-year wages must make all catch-up contributions as Roth (after-tax) contributions.

How does 401(k) employer match work?

An employer match is free money added to your 401(k) based on your own contributions. The most common formula is 100% match up to 3% or 4% of salary, meaning your employer contributes $1 for every $1 you put in, up to 3–4% of your gross pay. For an employee earning $80,000, a 100% match up to 3% means the employer contributes up to $2,400/year for free. The second most common formula is 50% match up to 6% — the employer contributes $0.50 for every $1 you put in, up to 6% of salary, for a maximum employer contribution of 3% of salary ($2,400 on $80,000). Always contribute at least enough to get the full employer match before anything else — it is an immediate 50–100% return on your money.

How much should I contribute to my 401(k)?

The standard recommendation from financial planners follows a priority order: first, contribute enough to get the full employer match (this is the highest guaranteed return available). Second, consider maxing out a Roth IRA ($7,000 in 2025). Third, return to your 401(k) and increase contributions toward the $23,500 limit. A common total savings target is 15% of gross income including employer match. If you're starting late, the catch-up provisions allow significantly higher contributions once you reach 50 (and especially 60–63 under SECURE 2.0).

Traditional 401(k) vs Roth 401(k)

A traditional 401(k) is funded with pre-tax dollars: your contribution is deducted from your taxable income today, reducing your tax bill. Withdrawals in retirement are taxed as ordinary income. A Roth 401(k) is funded with after-tax dollars: no immediate tax benefit, but withdrawals in retirement are completely tax-free. Unlike a Roth IRA, a Roth 401(k) has no income limits — anyone can contribute regardless of income. Both have the same annual contribution limits ($23,500 in 2025). The choice depends on the same logic as Roth vs Traditional IRA: if you expect a higher tax rate in retirement, Roth is usually better; if lower, Traditional is usually better.

The power of employer match and compound growth

Consider an employee earning $80,000 who contributes 6% ($4,800/year) and receives a 50% match up to 6% ($2,400/year employer match). Total invested per year: $7,200. Over 30 years at 7% annual return, this grows to approximately $728,000. The employer match alone ($2,400/year for 30 years at 7%) would compound to about $243,000 — more than a third of the total balance — at zero cost to the employee. This illustrates why capturing the full employer match is always the first priority.

What happens if you leave your job?

Your employee contributions to a 401(k) are always 100% vested immediately — they are yours. Employer match contributions may be subject to a vesting schedule, meaning you only keep the employer match after working for a certain period (common: 3–6 years, either cliff vesting or graded vesting). When you leave, you have four options: roll over to your new employer's 401(k), roll over to an IRA (usually the best option for investment flexibility), leave it with your former employer (if balance is above $5,000), or cash out (triggers income tax plus 10% early withdrawal penalty if under 59½).