💼 401k Calculator

A 401k is an employer-sponsored retirement savings plan. You contribute pre-tax (Traditional) or after-tax (Roth) dollars, which grow tax-deferred or tax-free. Key benefits: 1. Employer match = instant 50-100% return 2. Tax-deferred growth (compounding on full amount) 3. Reduces current taxable income (Traditional) 4. High contribution limits vs IRA ($23,500 vs $7,000)

Employee contribution limit: $23,500/year Age 50+ catch-up: $7,500 extra = $31,000 Age 60-63 catch-up (new!): $11,250 extra = $34,750 (SECURE 2.0 Act provision) Total limit (incl. employer): $70,000/year (employee + employer + profit sharing) IRA limit (2025): $7,000 ($8,000 if 50+)

Most common match: 50% up to 6% of salary (= 3% of salary free if you contribute 6%+) Example: $90,000 salary, 50% match up to 6% You contribute 6%: $5,400/year Employer adds 50%: $2,700/year FREE Total going in: $8,100/year ALWAYS contribute enough to get the full match. It is a 50-100% instant return — unbeatable anywhere.

Traditional wins if: Retirement tax rate lower than current Roth wins if: Retirement tax rate same or higher Simple math (same contribution amount): Traditional: Pay taxes later on larger amount Roth: Pay taxes now on smaller amount Key: If tax rates are equal, after-tax outcome is same. Roth wins if rates go up; Traditional wins if they go down. Rule of thumb: Young earners (low bracket) = Roth Peak earners (high bracket) = Traditional

Traditional 401k: Must start taking withdrawals at age 73 (SECURE 2.0 raised from 72 to 73 in 2023) RMD amount = Account balance / Life expectancy factor Penalty for missing RMD: 25% of amount not withdrawn Roth 401k: Has RMDs starting at 73 BUT: Can roll to Roth IRA (no RMDs) before that Roth IRA: NO required minimum distributions ever