A 401k Calculator That Will Make You Rich

This 401k calculator can help you retire rich by motivating you to max out your 401k contributions

Everyone knows they should be saving a little money for retirement but that doesn’t mean you can’t put it off, right? Money is tight, and you have decades left to retire, plenty of time for those 401k contributions to add up later.

I could talk all day about how time is your friend in retirement savings or how waiting to start saving will cost you hundreds of thousands…but none of that works to convince people to save.

The average worker contributes 6.2% to their 401k plan according to Vanguard. Combined with their employer’s match, it’s about 11% of their salary. Younger workers save a little less those 34 and younger contributing just 5% on average while those over 54 seem to be scrambling with a 9% average savings rate.

But how much do you need to save in your 401k? How do you take advantage of employer match contributions to grow your retirement income?

This 401k calculator will help you calculate your retirement savings and motivate you to save. Not only will the contribution calculator estimate your 401k balance at retirement but will tell you how much retirement income you can expect.

I walk through how to use the 401k calculator and how to get the most from your retirement contributions below so be sure to scroll down.

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How this 401k Calculator Will Help You Get Rich!

Do you know how much your 401k contributions are worth? Know how much free money you’re missing out on by not maxing out your contributions up to the employer match?

I’m a numbers guy (ok, a numbers nerd and proud) but taking just five minutes to play around with a 401k calculator will make anyone a believer.

After seeing how much just a small monthly contribution will be worth, especially how much of that is free money from your employer, I guarantee you’ll be signing up for your 401k plan.

I designed the 401k calculator to be as simple as possible with just four questions. Play around with the numbers you use to see what you need to do to meet your retirement goals. The calculator will estimate how much your 401k will be worth by the time you retire and how much monthly income you can expect.

First, check your most recent 401k contributions statement to find your current balance. If you can’t find it, the plan sponsor will send you a copy.

Next, estimate how much you can contribute to your 401k account each month and how much your employer will contribute. You should always contribute at least enough to max out your employer match, it’s FREE MONEY!

If you’re not sure, ask your employer or plan sponsor how much they will contribute to the account. It’s usually something like half (50%) of what you contribute up to a certain amount.

Next, estimate the rate of return on your 401k contributions. This is the only number over which you have no control. Sure, we have historical numbers from the stock market but nobody knows what kind of return investors will get in the future.

You can play around with this number depending on how much you invest in stocks vs bonds and other assets. I would start conservatively by estimating 5.5% for a portfolio of stocks and bonds.

I wouldn’t count on a return over 7% for the 401k calculator for two reasons:

  • Remember, you’re estimating a total portfolio return and not just a return from stocks. All portfolios should have a mix of at least stocks and bonds. The return on bonds will be lower than stocks over the long-term but will help smooth out those stock market bumps.
  • I would rather underestimate the return on my 401k contributions, invest a little more each month, and then be pleasantly surprised, than overestimate and scramble to build my nest egg in my 60s.

Finally, estimate how many years until retirement. I say ‘estimate’ because this is kind of out of your control. You might have a plan for retiring at 65 but who knows what life will bring? I like to save as if I’ll be forced to retire at 62 just in case something happens.

Let’s use the 401k contribution calculator in an example.

Melissa makes $50,000 a year and contributes 6% of her salary to a 401k plan, approximately $3,000 or $250 a month. That’s the max on her company’s match which contributes 50% of her contribution up to 6% of salary. That means her employer puts in another $1,500 a year or $125 a month.

Melissa is 30 years old and has an average tolerance for risk so she has 80% of her 401k in stocks and the rest in bonds. She estimates she can make a 6% annual return over the next 30 years until she retires. She’s been contributing for quite a few years already and has $16,500 in her 401k account.

401k calculator example

The 401k calculator estimates that Melissa will have $450,529 in her account in 30 years if she continues to contribute the same amount and earns her estimated return.

The 401k contribution calculator also estimates she can expect a monthly retirement income of $1,501 from this amount. The calculator uses the standard 4% withdrawal to estimate this number so 0.04 times the $450,529 in the account then divided by 12 for a monthly number.

401k contribution calculator example

Understand that this monthly income estimate does not account for income taxes or social security. This only represents the amount she can safely expect if she has that much in her 401k account and withdraws 4% every year. If you want another look at your potential income in retirement, check out this retirement savings calculator I developed.

Get the Most from Your 401k Contributions and Retirement Saving

It always amazes me how many people don’t take full advantage of their employer-sponsored 401k plans. Ok, I have never liked the funds offered in employer plans. They always have high fees and the returns aren’t great…but that employer contribution makes it a no-brainer.

Most employers will offer at least a 50% match up to 6% of your salary. This means if you contribute just 3% of your salary into your 401k plan, your employer will put in $5 for every $10 you contribute.

For example, if you earn $36,000 annually then you should contribute at least $2,160 a year (0.03*$36,000) to get your employer to give you $1,080 in FREE retirement savings.

That’s like getting an instant 50% return on your money. Even the best stock-pickers in the world don’t get close to that amount. Maybe the most famous investor of all-time, Warren Buffett of Berkshire Hathaway, has only been able to produce a 20% annualized return over the 50 years since 1965.

Max out your 401k contributions and beat Warren Buffett at investing!

If you want to save more than what your employer is willing to match, consider opening an individual retirement account (IRA) or a Roth IRA. This is a personal investing account so you control the investments completely.

Like a 401k retirement account, you get an immediate tax deduction for money you put in a regular IRA. When you take money out of these accounts in retirement, you pay income taxes on the entire amount.

Money you contribute to a Roth IRA goes in after taxes, you don’t get that immediate deduction, but you get to take the money out in retirement totally tax free. You never pay taxes on your investment returns from a Roth IRA account!

Saving for retirement is just as important as paying off those high-interest debts and credit cards. Don’t wait until you’re debt-free to start saving for your future. If you’re struggling to pay off debt, try this loan payoff calculator to see how much you can save by consolidating your loans or just adding a little to the payment.

Check out all our financial calculators to help grow your nest egg!

401k contribution calculator

I could go on for hours about 401k investing and retirement savings but I hope this 401k calculator has motivated you to get started saving your nest egg. Your 401k contributions don’t have to be tens of thousands a year to produce a great income in retirement if you take advantage of the employer match. Play around with the calculator to find how much you need to save to beat your investing goals.