How to use this calculator
Enter your current age, the age you plan to retire, your annual salary, and the percentage you contribute to your 401(k). Then add your employer's match details, most employers match a percentage of your contributions up to a cap. Set the expected annual return (7% is a common long-term assumption for a diversified stock portfolio) and your expected salary increase rate.
The calculator projects your total balance at retirement, breaks down how much came from your contributions versus your employer versus investment growth, and estimates your monthly retirement income using the widely-referenced 4% withdrawal rule.
Why the employer match matters
The employer match is one of the best deals in personal finance. If your employer matches 50% of your contributions up to 6% of your salary, that's an instant 50% return on those dollars before any investment gains. No other investment offers a guaranteed return like that.
Consider someone earning $75,000 who contributes 6% ($4,500 per year) with a 50% employer match. The employer adds $2,250 annually. Over 35 years at 7% returns, that employer match alone grows to roughly $330,000. That's free money you'd miss out on by not contributing enough to get the full match.
The power of starting early
Time is the most powerful factor in retirement savings. Someone who starts contributing $5,000 per year at age 25 and stops at 35 (10 years of contributions) can end up with more money at 65 than someone who starts at 35 and contributes every year until 65 (30 years of contributions), assuming the same rate of return.
This happens because the early contributions have decades more time to compound. Every year you delay costs you disproportionately more than the last year you add. If retirement savings feels overwhelming, start with whatever you can and increase it annually. Even 1% more per year adds up significantly over a career.
Understanding the 4% rule
The 4% rule comes from the Trinity Study, which analyzed historical market data to determine a sustainable withdrawal rate for a 30-year retirement. The idea is simple: withdraw 4% of your portfolio in the first year of retirement, then adjust that amount for inflation each year.
For example, with a $1 million portfolio, you'd withdraw $40,000 in year one (about $3,333 per month). The next year, if inflation is 3%, you'd withdraw $41,200. This approach has historically had a high success rate for portfolios invested in a mix of stocks and bonds.
Keep in mind the 4% rule is a starting point, not a guarantee. Your actual safe withdrawal rate depends on market conditions at retirement, your asset allocation, other income sources like Social Security, and how long your retirement lasts. Many financial planners now suggest 3.5% for extra safety or using a flexible withdrawal strategy.
Frequently asked questions
What is a 401(k) and how does it work?
A 401(k) is an employer-sponsored retirement savings plan that lets you contribute a portion of your pre-tax salary. Your contributions grow tax-deferred until you withdraw them in retirement. Many employers also match a percentage of your contributions, which is essentially free money added to your account.
What are the 401(k) contribution limits for 2025?
For 2025, the employee contribution limit is $23,500 per year. If you are 50 or older, you can make an additional $7,500 in catch-up contributions, bringing your total employee limit to $31,000. The combined limit for employee and employer contributions is $70,000 (or $77,500 with catch-up contributions).
How does employer matching work?
Employer matching means your company contributes additional money to your 401(k) based on how much you contribute. A common formula is a 50% match up to 6% of your salary. If you earn $75,000 and contribute 6% ($4,500), your employer adds $2,250. Always aim to contribute at least enough to get the full match.
What is the 4% rule for retirement withdrawals?
The 4% rule suggests you can withdraw 4% of your retirement portfolio in the first year and adjust for inflation each year after. A $1 million portfolio would provide about $40,000 per year or $3,333 per month. It's a useful guideline, but your actual safe withdrawal rate depends on market conditions, your expenses, and other income sources like Social Security.