The 401k Employer Match Is the Closest Thing to Free Money
A 25-year-old contributing $400/month to a 401(k) with a 50% employer match ($200/month) and 7% average annual return accumulates approximately $1.3 million by age 65. Without the employer match, the same contributions yield only $877,000 — the match contributes over $420,000 to the final balance. The 2026 IRS contribution limit is $24,500 for employees under 50, and $32,500 for those 50 and older (including $8,000 catch-up contribution). At minimum, contribute enough to receive the full employer match — failing to do so is leaving guaranteed 50–100% return on the table.
How to Use the 401k Calculator
Enter your current age and target retirement age, current 401(k) balance, monthly employee contribution, employer match percentage and cap (e.g., 50% match up to 6% of salary), and expected annual return. Use 6–7% as a conservative estimate for a diversified portfolio. The calculator projects your balance at retirement, shows how much comes from your contributions vs employer match vs investment growth, and displays a year-by-year growth chart.
Frequently Asked Questions
At minimum, contribute enough to receive the full employer match — this is an immediate 50–100% return. Beyond that, contribute 10–15% of gross income. The 2026 IRS limit is $24,500/year for under-50, and $32,500 for 50+ (includes $8,000 catch-up). Max out if possible — 401(k) contributions reduce taxable income dollar-for-dollar.
A common match structure is 50% up to 6% of salary. If you earn $70,000 and contribute $4,200 (6%), your employer adds $2,100. That is a 50% guaranteed instant return — better than any investment. Some employers offer 100% match up to 3–4%, which is an even better deal on the first dollars contributed.
For a stock-heavy portfolio (S&P 500 index funds), 10% is the historical average before inflation, ~7% after inflation. For a balanced 60/40 portfolio, use 6–7% nominal. For conservative planning approaching retirement, use 5–6%. NerdWallet's 401(k) calculator defaults to 6% as a middle-ground estimate.
Traditional 401(k): contributions are pre-tax, reducing taxable income now. Withdrawals in retirement are taxed as ordinary income. Roth 401(k): contributions are after-tax — no current deduction but qualified withdrawals in retirement are completely tax-free. If you expect higher taxes in retirement, Roth is usually better. If you expect lower taxes in retirement, traditional saves more.
Four options: (1) Roll over to new employer's 401(k). (2) Roll over to an IRA — gives you more investment choices. (3) Leave it with the former employer if allowed. (4) Cash out — triggers ordinary income tax plus 10% early withdrawal penalty if under 59½. Cashing out early is almost always a costly mistake. Rolling to an IRA is usually the best option for investment flexibility.
