Understanding 401(k) Retirement Planning
A 401(k) is an employer-sponsored retirement savings plan that allows employees to contribute a portion of their salary before taxes are withheld. Many employers offer matching contributions, effectively giving you free money toward retirement. Our 401(k) calculator helps you understand how much you'll accumulate by retirement age and plan accordingly.
Employer Match: Free Money
If your employer offers a 100% match up to 5% of your salary, they'll double every dollar you contribute up to that 5% cap. Not taking full advantage of employer matching is literally leaving significant wealth on the table.
Key Retirement Concepts
Investment Growth and Compounding
The true power of a retirement account comes from compound interest over decades. A 30-year-old contributing 10% of a $75,000 salary with 50% employer matching and 7% annual returns could accumulate well over $1 million by age 65.
2025 & 2026 Contribution Limits
The IRS adjusts 401(k) contribution limits annually for inflation. Here are the current limits:
| Limit Type | 2025 | 2026 |
|---|---|---|
| Employee contribution (under 50) | $23,500 | $23,500 |
| Catch-up contribution (age 50–59) | $7,500 | $7,500 |
| Super catch-up (age 60–63) New 2025 | $11,250 | $11,250 |
| Total limit incl. employer (under 50) | $70,000 | $70,000 |
New in 2025 (SECURE 2.0 Act): Workers aged 60–63 are eligible for a higher "super catch-up" contribution of $11,250 — up from the standard $7,500 catch-up for those 50–59. This is a significant opportunity for anyone approaching retirement in that age bracket.
The IRS typically announces updated limits for the following year in October. Limits are indexed to inflation and may increase in future years. Always verify current limits at IRS.gov.
Roth 401(k) vs Traditional 401(k)
Traditional 401(k) contributions are made pre-tax — you pay tax when you withdraw in retirement. Roth 401(k) contributions are made after-tax — but qualified withdrawals in retirement are completely tax-free, including all the growth. If you expect to be in a higher tax bracket in retirement, the Roth option is often the smarter long-term choice. Both share the same contribution limits above.
Vesting Schedules
Most employers use a vesting schedule, meaning you gradually gain ownership of their contributions over time (e.g. 20% per year for 5 years). Your own contributions are always 100% yours immediately. Keep vesting schedules in mind when planning a job change — leaving before you're fully vested means leaving employer contributions behind.
Explore Compound Interest Further
Want to calculate returns for a general investment account rather than a 401(k)? Try our dedicated Compound Interest Calculator to see daily, weekly, or monthly compounding effects.
Compound Interest Calculator