What is a 401(k) and how does the calculation work?
A 401(k) is an employer-sponsored retirement savings arrangement in which an employee can direct part of their pay into an investment account. The projection combines four major forces: your existing balance, new employee contributions, employer matching contributions and investment growth.
The most important idea is that the calculator is not predicting a market outcome. It is answering a mathematical question: if the assumptions stay constant, how could the account evolve? That distinction makes the result useful for learning, scenario testing and planning conversations.
Employer match can add money without increasing your payroll deduction
Suppose an employer matches 50% of your contributions up to 6% of salary. If you contribute 6% of a $75,000 salary, you contribute $4,500. The employer contribution is 50% of that amount, or $2,250, assuming the plan's matching formula is exactly as modeled.
Example: $75,000 salary
The account receives $6,750 of new money before investment growth.
The match limit matters
If you contribute above the percentage eligible for matching, the extra employee contribution may still be invested, but the employer may not match that additional portion. Always read the plan's actual matching formula.
Where 401(k) planning fits into a working life
401(k) projection formulas
The calculator uses an annual step model. At the beginning of each year, salary is known; employee and employer contributions are determined; then the year's investment growth is applied to the account.
Salary for the next year is then increased by the assumed salary-growth rate. This makes the model easy to audit: every row in the year-by-year table shows salary, contributions, growth and ending balance.
Why the last years can look very different from the first years
Investment growth is calculated on the accumulated balance. As the balance becomes larger, the same percentage return can represent a much larger dollar amount. This is why retirement projections often show a curve that becomes steeper later in the timeline.
Worked 401(k) examples
How an employer match changes year-one savings
Salary: $75,000 · Employee rate: 8% · Employer match: 50% up to 6% of salary.
Employer: $75,000 × 6% × 50% = $2,250
Illustrative new money entering the account in year one, before investment growth.
Why five additional years can matter
Keep salary, contribution rate and return assumptions unchanged, then extend the retirement age by five years.
The extra years allow existing money and later contributions to participate in additional investment growth.
How to read the live graphs
The first graph separates the projected balance from the money contributed over time. The vertical distance between those lines is a visual approximation of accumulated investment growth. The second graph shows the final balance as a composition of employee contributions, employer contributions and growth.
How to use a 401(k) projection responsibly
Run multiple return assumptions
Try lower, base and higher return scenarios. A projection becomes more informative when you see how sensitive the result is to the assumed return.
Check the employer match
Understand both the match percentage and the salary percentage to which it applies. A headline “50% match” does not mean the employer contributes 50% of your entire salary.
Watch contribution limits
Contribution limits can change by tax year. Treat the limit field as an assumption and update it when official limits change.
Separate nominal and real outcomes
A future balance is a nominal dollar amount. Inflation, taxes, fees and withdrawals can change the purchasing power and the amount available for spending.
401(k) calculator FAQ
It estimates how an account could grow under stated assumptions for salary, contributions, employer matching, investment return and time. It is a scenario model, not a guarantee.
It is an employer contribution linked to the employee's contribution according to the plan's rules. The match rate and the salary percentage eligible for matching are separate concepts.
Because many plans do not match every dollar of compensation without limit. The match limit field represents the maximum salary percentage used for the modeled employer contribution.
No. It applies the annual return assumption you enter. Actual returns can vary from year to year and may be negative.
The projected account balance is shown before retirement tax. The monthly retirement-income figure applies the separate tax assumption you enter and is illustrative rather than a tax calculation.
The calculator uses 4% of the projected retirement balance per year as a simple educational spending-rate illustration, divided by 12 for a monthly figure. It is not a personalized withdrawal recommendation.
Yes. Fees, investment returns, contribution timing, vesting, plan rules, taxes, inflation, salary changes and withdrawals can all change the real outcome.