What is a 401k?
A 401(k) is an employer-sponsored retirement savings plan that allows employees to save and invest a portion of their paycheck before taxes are taken out. Taxes are paid when the money is withdrawn in retirement.
2024 401k Contribution Limits
- Employee Contribution: $23,000 (under age 50)
- Catch-up Contribution: Additional $7,500 (age 50+)
- Total Limit (including employer): $69,000 or $76,500 with catch-up
Understanding Employer Matching
Many employers offer matching contributions as an incentive. A common match formula is "50% match up to 6% of salary," which means:
- If you contribute 6% of your salary, your employer adds 3%
- This is essentially free money - always try to get the full match!
- Match formulas vary by employer (some offer 100% match)
Benefits of a 401k
- Tax-Deferred Growth: Your investments grow without being taxed until withdrawal
- Lower Taxable Income: Contributions reduce your current taxable income
- Employer Match: Free money that boosts your savings
- Automatic Saving: Contributions are deducted from your paycheck
- Higher Limits: Contribution limits are higher than IRAs
401k vs Roth 401k
- Traditional 401k: Pre-tax contributions, taxed at withdrawal
- Roth 401k: After-tax contributions, tax-free withdrawals
Tips for Maximizing Your 401k
- At minimum, contribute enough to get the full employer match
- Increase contributions by 1% each year
- Take advantage of catch-up contributions after age 50
- Review and rebalance your investments annually
- Avoid early withdrawals (10% penalty before age 59.5)
401(k) Contribution Limits
| Year | Employee Limit | Catch-up (Age 50+) | Total with Employer |
|---|---|---|---|
| 2024 | $23,000 | +$7,500 ($30,500 total) | $69,000 ($76,500 with catch-up) |
Note: The IRS adjusts these limits annually for inflation. Check IRS.gov for the latest figures.
401(k) Growth Projection Table
Approximate ending balance after 30 years of monthly contributions at a starting balance of $0, compounded monthly.
| Monthly Contribution | 6% Annual Return | 8% Annual Return | 10% Annual Return |
|---|---|---|---|
| $200/month | $201,000 | $298,000 | $452,000 |
| $400/month | $402,000 | $596,000 | $904,000 |
| $600/month | $603,000 | $894,000 | $1,356,000 |
| $800/month | $804,000 | $1,192,000 | $1,808,000 |
Values are rounded to the nearest $1,000 and assume no starting balance, no salary increases, and steady monthly compounding.
Common Employer Match Scenarios
| Match Type | How It Works | Example ($60K salary) |
|---|---|---|
| 50% match up to 6% | Employer adds $0.50 for every $1 you contribute, up to 6% of salary | Contribute $3,600 → get $1,800 employer match |
| 100% match up to 3% | Employer matches dollar-for-dollar up to 3% of salary | Contribute $1,800 → get $1,800 employer match |
| No match | Employee contributions only | All growth comes from your own deposits and investment returns |
Frequently Asked Questions
How accurate are the results?
The 401k applies a standard formula to your inputs — accuracy depends on how precisely you measure those inputs. For planning and estimation, results are reliable. For high-stakes or professional decisions, cross-check the output with a domain expert or primary source.
Does this include Social Security income?
Most retirement calculators focus on portfolio-based savings. Social Security typically provides $1,500–$3,500/month for average earners — add this as an income offset when planning your required portfolio withdrawal rate.
How much should I contribute to my 401(k)?
At a minimum, contribute enough to capture your full employer match — that is free money with an immediate 50–100% return. Beyond that, aim to save 10–15% of gross income including any employer match. If you cannot reach that level immediately, start where you can and increase your contribution by 1% each year.
What is a good 401(k) employer match?
A common benchmark is 50% of employee contributions up to 6% of salary, which effectively adds 3% of your salary for free. Some employers offer a 100% match up to 3–4% of salary. Any employer match is valuable — even a modest match dramatically accelerates long-term growth because that money compounds immediately alongside your own contributions.
What is the 401(k) contribution limit for 2024?
For 2024, employees can contribute up to $23,000. Workers aged 50 and older can add a catch-up contribution of $7,500, raising their personal limit to $30,500. The combined employee-plus-employer total cannot exceed $69,000 (or $76,500 with the catch-up contribution). The IRS adjusts these limits annually for inflation.
What happens to my 401(k) if I leave my job?
Your vested 401(k) balance is always yours to keep. You typically have four options: leave it in your former employer's plan (if allowed), roll it over to your new employer's plan, roll it over to an IRA, or cash it out. Cashing out triggers ordinary income tax plus a 10% early-withdrawal penalty if you are under 59½, so a direct rollover is usually the best choice to preserve tax-advantaged growth.