401k Calculator
Estimate your 401k growth with employer matching and compound interest.
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2024 limit: $23,000 (under 50), $30,500 (50+)
e.g., 50% means employer contributes $0.50 per $1.00 you contribute
Historical average: 7-10% annually
401(k) Retirement Statistics
$23K
2024 Contribution Limit
$30.5K
Limit (Age 50+)
$134K
Average Balance
7-10%
Historical Returns
Smart 401(k) Strategies
Max Employer Match
Always contribute at least enough to get your full employer match - it's free money!
Start Early
Starting at 25 vs 35 can mean hundreds of thousands more at retirement due to compound growth.
Increase Annually
Increase your contribution by 1% each year until you max out the limit.
Diversify Holdings
Spread investments across stocks, bonds, and target-date funds for balanced growth.
Catch-Up Contributions
If you're 50+, take advantage of the extra $7,500 catch-up contribution limit.
Avoid Early Withdrawals
Early withdrawals before 59½ face a 10% penalty plus income taxes. Leave it to grow!
Understanding 401k Plans
A 401k plan is an employer-sponsored retirement savings account that allows employees to save and invest for their retirement with tax advantages. Contributions are typically made through automatic payroll deductions before taxes.
One of the biggest advantages is employer matching, where your employer contributes additional money to your 401k based on your contribution level. This is essentially free money that significantly boosts your retirement savings.
2024 Contribution Limits
The IRS sets annual contribution limits for 401k plans. For the 2024 tax year, the contribution limits have been updated to account for inflation.
| Age Category | Contribution Limit |
|---|---|
| Under 50 | $23,000 |
| 50 or Older | $30,500 |
Investment Options
401k plans offer a variety of investment options, typically including mutual funds, stocks, bonds, and other securities. It is important to diversify your investments to spread risk and increase the potential for growth.
| Investment Type | Description |
|---|---|
| Mutual Funds | Pooled investments managed by a professional. Includes stocks, bonds, and other securities. |
| Stocks | Equity investments representing ownership in a company. |
| Bonds | Debt investments where you loan money to an entity in exchange for interest payments. |
| Target-Date Funds | Funds that automatically adjust the asset mix as the target date approaches, becoming more conservative. |
Key Benefits of a 401k
Tax-Deferred Growth
Investments grow tax-free until withdrawals begin at retirement.
Employer Matching
Free money from your employer that boosts your retirement savings.
Higher Contribution Limits
Compared to IRAs, 401k plans have higher annual contribution limits.
Loan Options
Many 401k plans offer loan provisions, allowing you to borrow against your savings.
Maximizing Your 401k
Compound Interest Power
The power of compound interest allows your 401k investments to grow exponentially over time. The interest you earn each year is added to your principal balance, and the next year, you earn interest on the new, larger principal balance.
Automatic Contributions
Setting up automatic contributions from your paycheck to your 401k plan ensures consistent savings. Even small contributions can grow significantly over time.
Maximize Employer Match
Take advantage of employer matching contributions. Contribute enough to get the full match, as this is essentially free money that boosts your retirement savings.
Withdrawals and RMDs
You can start withdrawing from your 401k without penalties at age 59½. However, you must start taking required minimum distributions (RMDs) at age 73, which are based on your account balance and life expectancy.
Frequently Asked Questions
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