401(k) Calculator

A 401(k) is an employer-sponsored retirement savings plan that allows employees to contribute a portion of their salary to individual accounts. Many employers offer matching contributions, which is essentially free money for your retirement.

Key features of 401(k) plans:

1. Tax Advantages: Traditional 401(k) contributions are pre-tax, reducing your current taxable income
2. Employer Matching: Many employers match a portion of your contributions
3. Higher Contribution Limits: Much higher than IRA limits ($22,500 in 2023, plus $7,500 catch-up if 50+)
4. Automatic Payroll Deductions: Makes consistent saving easier
5. Investment Options: Typically offer a range of investment choices

401(k) Contribution Strategies

• Contribute enough to get the full employer match: This is free money you shouldn't leave on the table

• Aim for 10-15% of your income: Including employer match, try to save 10-15% of your salary for retirement

• Increase contributions gradually: Increase your contribution rate by 1% each year until you reach your target

• Take advantage of catch-up contributions: If you're 50 or older, you can contribute additional funds

• Consider Roth 401(k) options: If available, Roth contributions are made with after-tax dollars but grow tax-free

Understanding these strategies can help you maximize your 401(k) benefits and build a substantial retirement nest egg.