How a 401(k) Calculator Works
A 401(k) is an employer-sponsored retirement account where you contribute a portion of your salary, often with your employer matching part of what you put in. A 401(k) calculator projects how that account will grow by the time you retire, combining your contributions, your employer's match, and decades of compound investment growth.
The employer match is one of the most valuable features. A typical plan might match 50% of your contributions up to 6% of your salary — effectively free money added to your account each year. This calculator models that match, then shows your projected balance both in future dollars and in today's dollars after adjusting for inflation.
The 401(k) Formulas
Each year combines growth on your existing balance with new contributions and the matched portion of your salary:
- Your Annual Contribution = Salary × Your Contribution %
- Employer Match = min(Your %, Match Limit) × Salary × Match %
- Each Year: Balance = Balance × (1 + Return) + Your Contribution + Employer Match
- Today's Dollars = Final Balance ÷ (1 + Inflation)^Years
How to Get the Most From Your 401(k)
Small decisions about how much you contribute and when you start can add hundreds of thousands of dollars to your retirement balance.
- Always contribute at least enough to capture your full employer match — anything less leaves free money on the table.
- Starting early gives your contributions decades of compounding, which matters far more than the amount.
- Increasing your contribution rate with each raise grows your balance without straining your budget.
- Reviewing the inflation-adjusted balance shows what your savings will actually be worth in today's purchasing power.
Frequently Asked Questions
How much should I contribute to my 401(k)?
At a minimum, contribute enough to capture your full employer match, since that match is an immediate return on your money. Many advisors suggest aiming for 10% to 15% of your salary including the match. The more you can contribute early, the more time compound growth has to work in your favor.
How does the employer match work?
A common structure is an employer matching 50% of your contributions up to a limit such as 6% of your salary. If you contribute 6% and your employer matches 50% of that, they add an amount equal to 3% of your salary. Contributing beyond the match limit still grows your savings but does not earn additional matching funds.
Why show the balance in today's dollars?
A large future balance can be misleading because inflation erodes purchasing power over time. Showing the balance in today's dollars adjusts for inflation so you can understand what your retirement savings will actually buy. It gives a more realistic picture than the nominal future number alone.