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A 401(k) account can be a major source of income in retirement. But how much you have available to spend during your golden years depends on several factors, including when you start saving, how much you contribute and whether your employer offers a match.

How to use our 401(k) calculator

Although no one can predict the future, a 401(k) calculator can help you gauge whether you are on track to hit your savings goals. It can also provide a rough estimate of how much you’ll have in your account when you retire.

Our calculator makes it easy to plug in your information and calculate your 401(k) account balance at your expected retirement age. 

Assumptions

This 401(k) calculator is most useful when customized with your data. But here are the assumptions we used for our default numbers in case you aren’t sure what to enter:

  • Age: 39. The national median age was 39 in 2022, according to 91Ӱ Census Bureau data. If you are younger and begin saving in your 401(k) now, you’ll have a head start on building your nest egg. If you are older, don’t give up hope. You may just need to save a little more to reach your goal.
  • Age at retirement: 67. The Social Security Administration has designated 67 as the full retirement age for workers born in 1960 or later.
  • 401(k) contribution percentage: 10%. Many experts suggest saving between 10% and 15% of your income for retirement. We use 10%, which may be more attainable for many workers.
  • Current income: $40,000. The Social Security Administration reports the median net compensation was about $40,000 in 2022, so we use that figure. Adjust this number to reflect your income for a more accurate result.
  • Existing 401(k) balance: $0. We assume you are starting from scratch. But if you have an existing 401(k) balance, enter it here.
  • Income growth: 3%. This number reflects how much your income is expected to increase annually. Annual raises often mirror inflation rates, so we use 3%, which is roughly the Social Security cost-of-living adjustment for 2024.
  • Employer match: 5%. According to data from Fidelity, the average employer contribution is 4.8% of a worker’s compensation. We round up to 5% for our assumption.
  • Investment return: 10%. Investment performance is not guaranteed and can vary depending on your fund choices and market conditions. For our assumption, we use the S&P 500 as a guide. The average annualized return for the index has been around 10% since 1957.

401(k)s: What are they, and why are they important?

A 401(k) is an employer-sponsored retirement account. Many companies offer these plans as an employee benefit, and they come with perks that make them an ideal way to save for retirement. Here’s why you should consider participating in your company’s 401(k) plan:

  • Tax advantage. Contributions to a traditional 401(k) are tax-deductible, delaying taxes until you make withdrawals in retirement. Some businesses also offer Roth 401(k) accounts, where contributions aren’t deductible but withdrawals in retirement are tax-free.
  • Employer match. Many companies match a portion of worker contributions up to a certain amount. The match may be dollar for dollar or a percentage, such as 50 cents per dollar. According to Vanguard, the most common matching formula is 50% on the first 6% of pay.
  • Low fees. While you won’t pay anything out of pocket to open and maintain a 401(k), funds within the plan may have fees. But funds in 401(k) plans can be cheaper than funds in IRAs, according to The Pew Charitable Trusts.
  • Payroll deductions. A 401(k) is an easy way to save for retirement. Money is withdrawn directly from your paycheck. These automated contributions can make saving for retirement feel painless.

Retirement terms you should know

Retirement accounts have a jargon all their own. Here are some terms you must understand make the most of your 401(k) plan:

  • Defined contribution. 401(k)s are defined contribution plans. That means you and your employer put a specific amount of money into the account. They differ from pensions, which are defined benefit plans, in that the amount of money you will have available in retirement is not guaranteed. 
  • Tax-advantaged. A tax-advantaged account offers an opportunity to reduce your tax burden. If you have a traditional 401(k) account, the advantage is that contributions are made with pretax dollars. If you have a Roth 401(k) account, you make contributions with money you’ve already paid taxes on but receive tax-free withdrawals in retirement.
  • Automatic enrollment. Some employers automatically enroll workers in 401(k) plans and begin deducting money from their wages to place in the accounts. Employees can always opt out, though.
  • Contribution limit. Since 401(k) plans offer significant tax benefits, the government limits how much you can contribute to your account each year. The IRS updates this limit annually. In 2024, you can contribute $23,000 to your 401(k), or $30,500 if you’re 50 or older. 
  • Match. As mentioned, many employers match employee contributions. The match may be full, partial or a combination and is generally based on a percentage of your salary. 
  • Vesting. You must be fully vested in your 401(k) plan to keep employer contributions when you change jobs. Companies have different vesting schedules. The most common type is the graded schedule, where you increasingly vest annually.
  • Portfolio. Your portfolio refers to the assets in which you invest money. Most plans offer a selection of funds so you can decide where to put your 401(k) dollars. If you don’t choose, your money will be placed in a default fund, such as a target-date fund based on your expected retirement year.
  • Return. The rate of return, also referred to as gains or growth, is a measure of how much your investments increased or decreased in value. For instance, if a $1,000 investment grows by $100, you will have a 10% rate of return.
  • Risk. All investments have risk, meaning they could lose money. High-risk funds may have higher rates of return, but they are more volatile and could be prone to losses. Low-risk funds often don’t earn as much, but you are less likely to lose money. Some 401(k) plans identify funds by their estimated risk levels.
  • Expense ratio. An expense ratio refers to how much it costs to own a fund. For instance, $1,000 held in a fund with a 1% expense ratio will cost you $10. This fee is deducted from the fund’s balance.

Tips to help with retirement savings

Whether you’re 25 or 55, there is no time like the present to start saving for retirement. Here are some tips.

Open a retirement account

It might sound obvious, but you need a dedicated retirement account. A tax-advantaged account like a 401(k) is usually a great option. If your company doesn’t offer a 401(k) plan, consider an IRA.

Maximize the employer match

Most employers match a certain amount of employee 401(k) contributions. Find out how much your employer will match and then contribute at least that amount. It’s essentially free money you don’t want to leave on the table.

Look for funds with low fees

Fund fees can be easy to overlook in a 401(k). But over the course of several decades, they can have a significant impact on your account balance. 

Some passive index funds have expense ratios near 0%, while actively managed funds may charge more than 1%. If you want an actively managed fund — one where a manager researches and selects securities — remember to compare returns after fees so you get your money’s worth.

Diversify your investments

As the old saying goes, don’t put all your eggs in one basket. Instead, invest money in several funds. Known as diversification, this strategy reduces risk and helps ensure that if one fund performs poorly, not all your money will be subject to a loss.

Speak with a financial advisor

If selecting funds, managing risks and diversifying investments sounds overwhelming, enlist the help of a financial advisor. Some 401(k) plans offer free professional advice. Check with your company’s human resources department.

Increase your contributions annually

Help your retirement savings grow by increasing your contributions on a regular basis. If you get an annual raise, consider putting some or all of that money into your 401(k) account.

Avoid making withdrawals

Money in a 401(k) account is meant for retirement. You will generally pay income tax and a 10% penalty on withdrawals made before age 59½. There are ways around that, such as taking out a 401(k) loan. 

But even if you repay the money, you could miss out on potential gains and shortchange your future. Don’t withdraw from your 401(k) account unless you have exhausted your other options.

Frequently asked questions (FAQs)

How much a 401(k) will grow in 20 years depends on several factors, including how much you contribute, whether your employer matches contributions and how you invest your money.

For instance, if your rate of return is 8% annually, a 401(k) balance of $100,000 will grow to $446,096 after 20 years even if you never contribute another penny. But if your rate of return is 4% annually and you contribute $100 monthly, you’ll have only $255,616 after 20 years.

If you withdraw money from your 401(k) account prior to age 59½, you may have to pay a 10% early withdrawal penalty in addition to income tax. There are certain situations when you may be able to take a hardship distribution and avoid the penalty, though.

You should have three to six times your annual salary saved in a retirement account by age 50, according to investment firm T. Rowe Price.

You can have both a 401(k) and an IRA. But income limits may prevent you from being able to deduct traditional IRA contributions if you have a 401(k). 

In 2024, deductions for IRA contributions begin phasing out at the following modified adjusted gross incomes for people with workplace retirement plans: 

  • Above $77,000 for single filers.
  • Above $123,000 for married joint filers.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Maryalene LaPonsie has been writing professionally for nearly 25 years and specializes in personal finance, retirement, investing and education topics. In addition to 91Ӱ Blueprint, her work has been featured on Forbes Advisor, 91Ӱ News & World Report, Money Talks News, MSN and elsewhere on the web.

Joel Anderson

BLUEPRINT

Joel Anderson is a business writer who has been living and working in Los Angeles for over a decade. His work has appeared on sites like MSN.com, GoBankingRates and Equities.com, writing about subjects ranging from basic investing knowledge to tech start-ups. He’s focused on spreading financial literacy with his work, helping more people learn how to make their money work for them.

Hannah Alberstadt is the deputy editor of investing and retirement at 91Ӱ Blueprint. She was most recently a copy editor at The Hill and previously worked in the online legal and financial content spaces, including at Student Loan Hero and LendingTree. She holds bachelor's and master's degrees in English literature, as well as a J.D. Hannah devotes most of her free time to cat rescue.