Project future retirement savings with regular contributions, growth, and optional employer match.
This tool provides estimates for informational purposes only. It is not a substitute for professional advice. Individual results vary based on your inputs and assumptions, so review important decisions with a qualified professional.
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The 401(k) plan is the cornerstone of retirement savings for millions of American workers. With $7+ trillion held in 401(k) accounts across the US, understanding how to maximise your contributions, capture employer matching, choose investments, and project your retirement balance is essential for long-term financial security. This comprehensive guide covers 2024 contribution limits, employer matching strategies, vesting schedules, investment options, loan rules, and how to compare a 401(k) with the UK's SIPP.
A 401(k) is an employer-sponsored defined contribution retirement savings plan, named after Section 401(k) of the Internal Revenue Code. Employees contribute a percentage of their pre-tax salary (traditional 401(k)) or after-tax salary (Roth 401(k)), reducing their current or future tax burden. Contributions grow tax-deferred until withdrawal in retirement. Employers may match employee contributions up to a specified percentage, making the 401(k) one of the most powerful compensation benefits available.
| Contribution Type | 2024 Limit | Age 50+ (with catch-up) |
|---|---|---|
| Employee elective deferrals | $23,000 | $30,500 |
| Total (employee + employer) | $69,000 | $76,500 |
| Catch-up contribution (age 50+) | $7,500 | — |
Note: SECURE 2.0 created "super catch-up" contributions starting in 2025 for workers aged 60–63 ($11,250 catch-up), significantly enhancing late-career savings opportunities.
| Feature | Traditional 401(k) | Roth 401(k) |
|---|---|---|
| Tax treatment of contributions | Pre-tax (reduces current taxable income) | After-tax (no current deduction) |
| Growth | Tax-deferred | Tax-free |
| Qualified withdrawals | Taxed as ordinary income | Tax-free |
| RMDs | Required from age 73 | No RMDs (effective 2024, SECURE 2.0) |
| Income limits | None | None (unlike Roth IRA) |
Unlike the Roth IRA, the Roth 401(k) has no income limits — even high earners can contribute. This makes it a valuable tool for high-income workers who are above the Roth IRA income thresholds.
The employer match is widely described as "free money" because it is an immediate 50–100% return on your contribution. Typical match structures:
The minimum contribution to capture the full employer match should always be the first priority — it is mathematically impossible to do better elsewhere until this is maximised. The average employer match in the US is approximately 4.4% of salary.
Employer matching contributions may be subject to vesting — meaning you only own them fully after working for the employer for a specified period. Types of vesting:
Your own (employee) contributions are always 100% vested immediately. Understanding your vesting schedule is important when considering changing jobs.
Most 401(k) plans offer a menu of mutual funds rather than individual stocks. Typical options include:
Many 401(k) plans allow participants to borrow from their account:
Financial advisers generally caution against 401(k) loans unless absolutely necessary — you miss investment returns on the borrowed amount during repayment, and if you change jobs you may face a tax bill.
Distributions from a 401(k) before age 59½ are subject to ordinary income tax plus a 10% early withdrawal penalty. Exceptions include: separation from service at age 55 or older (Rule of 55), hardship distributions, disability, QDRO (divorce), and substantially equal periodic payments (72(t)). The CARES Act (2020) waived penalties temporarily during COVID-19; no equivalent relief is currently in place.
When you leave a job, you have several options for your 401(k): leave it with former employer, roll it to your new employer's plan, roll it to a traditional IRA (tax-free if direct rollover), or convert to a Roth IRA (taxable). Rolling to a traditional IRA is usually advisable because it preserves the tax-deferred status, provides greater investment choice, and potentially lower fees than employer plans.
Fidelity Investments' widely-cited guideline:
| Age | Target Savings (× Annual Salary) |
|---|---|
| 30 | 1× salary |
| 40 | 3× salary |
| 50 | 6× salary |
| 60 | 8× salary |
| 67 (retirement) | 10× salary |
The UK Self-Invested Personal Pension (SIPP) is the closest equivalent to a 401(k). Key differences:
Employees can contribute up to $23,000 in 2024 ($30,500 if age 50+, including $7,500 catch-up). The combined employee + employer limit is $69,000 ($76,500 age 50+). These limits do not include earnings on contributions.
The employer match is additional money your employer contributes based on your contribution percentage. The average match is approximately 4.4% of salary. You should always contribute at least enough to capture the full match — it is an immediate 50–100% return, which no investment can reliably match.
A vesting schedule determines when employer contributions become permanently yours. Immediate vesting: you own employer money from day one. Cliff vesting: 100% ownership after a set period (e.g. 3 years). Graded: ownership increases annually. Your own contributions are always 100% vested immediately.
You have four options: leave it with the former employer, roll it to your new employer's plan, roll it to a traditional IRA (no tax, direct rollover), or convert to a Roth IRA (taxable event). Rolling to a traditional IRA is usually recommended for maximum investment flexibility and potentially lower fees.
Yes. Most plans allow loans up to $50,000 or 50% of your vested balance, whichever is less. Repayment is typically over 5 years. Interest is paid back to yourself. Risks: missing investment growth during repayment, and if you leave the job the loan is typically due immediately or becomes a taxable distribution with penalties.
Withdrawals before 59½ face ordinary income tax plus a 10% early withdrawal penalty. Exceptions include the Rule of 55 (separation from service at 55+), hardship, disability, QDRO, and substantially equal periodic payments (72(t) rule).
A Roth 401(k) uses after-tax contributions — withdrawals in retirement are completely tax-free. Unlike the Roth IRA, there are no income limits for Roth 401(k) contributions. It is particularly beneficial for younger workers in lower tax brackets who expect higher taxes in retirement, and for high earners who exceed Roth IRA income limits.
Both are employer-sponsored defined contribution plans with tax benefits. Key differences: UK requires minimum 3% employer contribution under auto-enrolment; US employer match is discretionary. UK allows 25% tax-free lump sum at retirement. US Roth 401(k) provides tax-free withdrawals. Annual limits are broadly comparable. Both roll over when you change jobs.
A 401(k) calculator projects your retirement balance from current age to retirement age using contribution rate, employer match, expected return, and salary growth. With the 2026 employee limit of $23,500 (plus a $7,500 catch-up if age 50+), a 30-year-old earning $80,000 who contributes 10% with a 4% employer match and earns a 7% real return reaches about $1.4 million by age 65. The calculator runs this projection instantly for any salary, rate, and return assumption.
Employer match is the single highest-return investment most US workers will ever make. A typical "100% of the first 3%, then 50% of the next 2%" formula pays 4% of salary if you contribute 5%. On $80,000, that is $3,200 of free money per year. Failing to contribute up to the match means leaving a 4% pay rise on the table. Our 401(k) calculator models common match formulas (Safe Harbor, tiered, dollar-for-dollar) and shows exactly what you forfeit at sub-match contribution rates.
IRS 2026 limits: employee elective deferrals $23,500, age-50+ catch-up $7,500, ages 60-63 super-catch-up $11,250 (SECURE 2.0). Total contributions (employee + employer + after-tax) capped at $70,000 (or $77,500 with regular catch-up, $81,250 with super-catch-up). The calculator caps your contribution at the relevant limit and warns when you exceed it on a per-paycheck basis.
Traditional 401(k) defers tax to retirement; Roth 401(k) pays tax now and grows tax-free. The math: if your retirement tax rate equals your current rate, both produce identical after-tax balance. If you expect HIGHER retirement tax rates (likely for young high-savers), Roth wins. If you expect LOWER retirement tax rates (typical for late-career workers near peak earnings), Traditional wins. Our calculator side-by-sides both scenarios with your assumed tax rates.
Both are employer-sponsored defined-contribution retirement plans with tax relief on contributions and tax-deferred growth. Key differences: UK requires a minimum 3% employer contribution under auto-enrolment; US match is discretionary. UK allows 25% tax-free lump sum at age 55+; US Roth 401(k) gives tax-free growth on the Roth portion only. UK lifetime allowance was abolished in 2024; US has the $70,000 annual additions cap instead.
At minimum, enough to capture the full employer match (typically 4–6% of salary). Aim for 15% total (employee + employer) as a longer-term target.
Employee elective deferral $23,500, age-50+ catch-up $7,500, ages 60–63 super-catch-up $11,250. Combined employer+employee cap is $70,000.
Roth wins if your retirement tax rate will be higher than today; Traditional wins if it will be lower. Many savers split contributions between both to hedge tax-rate uncertainty.
Yes — up to $50,000 or 50% of vested balance, repaid over 5 years. Risk: leaving employment can trigger a deemed distribution + 10% penalty if under 59½.
Ordinary income tax + 10% penalty before age 59½. Exceptions include Rule of 55 (separation after age 55), 72(t) substantially equal periodic payments, disability, and qualified hardship.