🇺🇸 2026 401(k) Calculator & Retirement Growth Forecaster
2026 IRS Contribution Limits · Traditional vs. Roth 401(k) · Expense Ratio Fee Drag · Vesting Schedules · Paycheck Take-Home Impact · Solo 401(k) Self-Employed Max · Age 73 RMD Planner · SECURE 2.0 Super Catch-Up · Job Change Rollover · Court-Ready PDF
| Age | Salary | Emp Contrib | Match | Interest | Balance | Real Value |
|---|
| Age | Balance | Life Factor | RMD | Total Income | Est. Tax |
|---|
Opening Your Employer-Sponsored Retirement Plan
Your employer sponsors the plan through a provider (Fidelity, Vanguard, Schwab). You elect a contribution percentage of your gross salary. Most plans auto-enroll new hires at 3–6%.
HR → Payroll SetupPre-Tax (Traditional) vs. After-Tax (Roth) Contributions
Each paycheck, your elected percentage is deducted before federal and state income taxes are calculated. This reduces your taxable income — the government is essentially co-funding your retirement.
Traditional: Pre-TaxMaximizing Your Employer Match & Plan Limits
Most employers match 50–100% of your contributions up to a salary cap (e.g. “50% of the first 6%”). This is free money — an immediate 50–100% return on matched dollars before any investment growth.
Free Money — Don’t Leave ItTax-Deferred Compounding & Target-Date Funds
Your combined contributions invest in the mutual funds, index funds, or target-date funds you selected. Growth is tax-deferred — no capital gains, dividends, or income tax until withdrawal.
Tax-Deferred CompoundingNavigating 401(k) Vesting Schedules: Cliff vs. Graded
Your own contributions are always 100% yours immediately. But employer match may vest gradually — if you leave before full vesting, you forfeit unvested match. Immediate, cliff, and graded schedules vary by employer.
Check Your Vesting ScheduleIRS Withdrawal Rules: Age 59½ Penalties & Age 73 RMDs
Withdrawals after 59½ are taxed as ordinary income (Traditional) or completely tax-free (Roth). At age 73, Required Minimum Distributions (RMDs) force annual withdrawals from Traditional accounts per IRS tables.
RMD Starts at Age 73| Age Group | Employee Limit | Catch-Up Extra | Combined (w/ Employer) | Roth Option |
|---|---|---|---|---|
| Under 50 | $24,500 | — | $72,000 | ✅ Available |
| Age 50–59 | $24,500 | + $8,000 | $72,000 | ⚠️ Roth if earn $150k+ |
| Age 60–63 SUPER | $24,500 | + $11,250 | $72,000 | ⚠️ Roth if earn $150k+ |
| Age 64+ | $24,500 | + $8,000 | $72,000 | ⚠️ Roth if earn $150k+ |
| Solo 401(k) — Self-Employed | $24,500 employee | 25% net SE income | $69,000 | ✅ Available |
If your employer contributes $3,600/year and you leave at Year 2 of a 3-Year Cliff schedule, you forfeit 100% of all accumulated match — in this example:
SECURE 2.0 pushed the Required Minimum Distribution start age from 72 to 73 in 2023, and will further increase to age 75 in 2033. More years for tax-deferred growth before forced withdrawals.
Age 50+ employees earning more than $150,000 in the prior year must make all catch-up contributions as Roth (after-tax) starting in 2026. Plan administrators must support Roth 401(k) — check your SPD.
A new “super catch-up” provision allows employees aged 60–63 to contribute an extra $11,250 in catch-up (vs. the standard $8,000), for a total employee limit of $35,750 in 2026.
New plans established after December 29, 2022 must auto-enroll eligible employees at 3–10% of pay starting in 2025, with automatic escalation of 1% per year up to at least 10%. Employees can opt out.
SECURE 2.0 allows one penalty-free emergency withdrawal of up to $1,000 per year from retirement accounts for unforeseeable personal emergencies, with the option to repay within 3 years.
Starting 2024, employers can match employee student loan payments as if they were 401(k) contributions. If you’re paying student debt instead of contributing, your employer may still give you match credit.
| Calculation Step | Detail | Annual Amount |
|---|---|---|
| Gross Annual Salary | Year 1 base | $52,000 |
| Federal Income Tax (22% marginal) | Approx. effective ~14.2% | − $7,384 |
| Illinois State Tax | Flat 4.95% | − $2,574 |
| FICA (SS 6.2% + Medicare 1.45%) | 7.65% of $52,000 | − $3,978 |
| Net Annual Take-Home (Before 401k) | $38,064 | |
| Employee 401(k) Contribution (6%) | Pre-tax deduction reduces taxable income | − $3,120 |
| Federal Tax Savings on Contribution | $3,120 × 22% marginal rate | + $686 saved |
| Real Paycheck Cost of 401(k) | $3,120 − $686 tax savings | $2,434/yr = $203/mo |
| Employer Match Added to Account | 50% × $3,120 (6% contribution) | + $1,560 |
| Total Annual 401(k) Contributions | Employee + Employer | $4,680/yr |
| Starting Balance | Prior savings in existing account | $8,000 |
| Net Return Rate | 7.00% − 0.12% expense ratio | 6.88%/yr |
| Years to Retirement | Age 28 → 65 | 37 years |
| FV of Starting Balance ($8,000 × 1.0688³⁷) | $8,000 × 11.94 factor | $95,520 |
| FV of Annual Contributions ($4,680/yr) | Annuity FV over 37 years @ 6.88% | $745,680 |
| Projected Balance at Age 65 | Nominal value | $841,200 |
| Calculation Step | Detail | Amount |
|---|---|---|
| Gross Annual Salary | Year 1 base | $185,000 |
| Federal Tax (32% marginal, ~24% effective) | Approx. federal effective rate | − $44,400 |
| Texas State Income Tax | Texas has NO state income tax | $0 |
| FICA (SS + Medicare + 0.9% additional) | $147,000 SS cap + Medicare uncapped | − $14,493 |
| Roth 401(k) Contribution (after-tax) | Does NOT reduce taxable income | − $24,500 |
| Net Take-Home After All Deductions | Year 1 | $101,607 |
| Employer Match (100% × 4% × $185,000) | $7,400 added to Traditional sub-account | + $7,400 |
| Total Annual 401(k) Contribution | Employee Roth + Employer Traditional | $31,900/yr |
| Starting Balance | Existing 401(k) balance | $280,000 |
| Net Return Rate | 8.00% − 0.03% fee | 7.97%/yr |
| IRS Limit Check (2026) | $24,500 employee + $7,400 match = $31,900 | ✅ Under $72,000 combined |
| FV of Starting Balance ($280,000 × 1.0797²³) | $280,000 × 5.97 factor | $1,671,600 |
| FV of Annual Contributions ($31,900/yr) | Annuity FV over 23 years @ 7.97% | $1,991,200 |
| Projected Balance at Age 65 | Nominal value | $3,662,800 |
| Calculation Step | Detail | Annual Amount |
|---|---|---|
| Gross Annual Salary | Year 1 base | $165,000 |
| Traditional 401(k) Contribution | Pre-tax base — reduces federal & NY taxable income | − $24,500 |
| Mandatory Roth Catch-Up | After-tax — does NOT reduce taxable income | − $8,000 (after-tax) |
| Taxable Income (after Traditional deduction) | $165,000 − $24,500 | $140,500 |
| Federal Tax Savings on Traditional Contribution | $24,500 × 32% marginal rate | $7,840 saved |
| NY State Tax Savings on Traditional Contribution | $24,500 × 10.9% NY rate | $2,671 saved |
| Net Cost of $24,500 Traditional Contribution | After federal + state tax savings | $13,989/yr effective cost |
| Employer Match Added | 50% × 6% × $165,000 | + $4,950 |
| Total Annual 401(k) Contributions | $24,500 Trad + $8,000 Roth + $4,950 match | $37,450/yr |
| Starting Balance | Existing 401(k) balance | $520,000 |
| Net Return Rate | 6.50% − 0.18% fee | 6.32%/yr |
| FV of Starting Balance ($520,000 × 1.0632¹⁰) | $520,000 × 1.849 factor | $961,480 |
| FV of Annual Contributions ($37,450/yr) | Annuity FV over 10 years @ 6.32% | $500,820 |
| Projected Balance at Age 65 | Nominal value | $1,462,300 |
| Calculation Step | Detail | Amount |
|---|---|---|
| Net Self-Employment Income | LLC consulting revenue minus business expenses | $220,000 |
| SE Tax (15.3% on 92.35% of SE income) | $220,000 × 92.35% × 15.3% | − $31,083 |
| SE Tax Deduction (½ of SE tax) | Reduces adjusted gross income | $15,541 deduction |
| Modified Compensation for 25% Employer Calc | $220,000 − $15,573 (IRS method) | $204,427 |
| 25% Employer Profit-Sharing (max allowed) | 25% × $204,427 = $51,107 → capped at $36,250 | $36,250 |
| Employee Super Catch-Up Deferral (Age 60–63) | $24,500 base + $11,250 super catch-up | $35,750 |
| Total Solo 401(k) Annual Contribution | $35,750 + $36,250 = $72,000 combined cap | $72,000 |
| Total Pre-Tax Deduction from AGI | Employee deferral + employer PS + ½ SE tax | − $87,291 |
| Estimated Federal Tax Savings | $87,291 × 32% marginal rate | $27,933 saved |
| Starting Balance | Existing Solo 401(k) | $890,000 |
| Net Return Rate | 7.00% − 0.10% fee | 6.90%/yr |
| FV of Starting Balance ($890,000 × 1.069⁹) | $890,000 × 1.832 factor | $1,630,480 |
| FV of Annual Contributions ($72,000/yr) | Annuity FV over 9 years @ 6.90% | $870,920 |
| Projected Balance at Age 70 | Nominal value | $2,501,400 |
| Calculation Step | Jennifer | David | Combined |
|---|---|---|---|
| Annual Salary | $95,000 | $78,000 | $173,000 |
| Employee Contribution Rate | 8% | 10% | — |
| Employee Annual Contribution | $7,600 | $7,800 | $15,400 |
| Employer Annual Match | $2,850 | $2,340 | $5,190 |
| Total Annual Contributions | $10,450 | $10,140 | $20,590 |
| Current Balance | $45,000 | $28,000 | $73,000 |
| Net Return Rate (after fees) | 7.35% (7.5%−0.15%) | 7.42% (7.5%−0.08%) | 7.38% avg |
| Years to Retirement | 30 years | 30 years | 30 years |
| FV of Starting Balance | $375,300 | $234,400 | $609,700 |
| FV of Annual Contributions | $1,051,700 | $1,020,000 | $2,071,700 |
| Projected Balance at Age 65 | $1,427,000 | $1,254,400 | $2,681,400 |
The employer match is the only investment in the world that gives you a guaranteed 50% to 100% instant return before a single dollar of market growth occurs. Financial planners universally agree: capturing the full employer match is more important than paying off student loans, credit cards, or building a taxable brokerage account. It is the single highest-priority financial action for any W-2 employee with a 401(k).
| Scenario | Your Contrib/yr | Match/yr | Balance at 65 | Difference |
|---|---|---|---|---|
| Contribute 6% — Full Match | $3,900 | $1,950 | $595,400 | Baseline ✅ |
| Contribute 3% — Half Match | $1,950 | $975 | $297,700 | − $297,700 |
| Contribute 0% — No Match | $0 | $0 | $0 | − $595,400 |
- Contribute at least the exact percentage needed to get the full match — not a penny less
- Read your Summary Plan Description to find the exact match formula and ceiling
- If your plan has a true-up provision, consider front-loading later in the year
- If you can’t afford the full match %, start at 2% and escalate 1% every 6 months
- Don’t contribute less than the match threshold — ever, under any circumstance
- Don’t prioritize paying off low-interest debt before capturing the full match
- Don’t assume your HR auto-enrolled you at the match-maximizing rate — check
- Don’t forget to re-enroll after a plan year break or leave of absence
Behavioral finance research shows that people who commit to automatic annual escalation accumulate an average of 40% more by retirement than those who manually decide each year — because they never actually make the decision. A 1% annual increase on a $70,000 salary is only $58.33/month. You won’t notice it after the first paycheck. But the compounding impact over 25 years is extraordinary.
| Contribution Strategy | Rate Range | Total Invested (30yr) | Employer Match | Projected Balance |
|---|---|---|---|---|
| Stay Flat at 6% Forever | 6% all 30 yrs | $126,000 | $63,000 | $587,300 |
| Escalate 1%/yr — Stop at 10% | 6% → 10% (4 yrs) | $183,700 | $63,000 | $731,500 |
| Escalate 1%/yr — Stop at 15% | 6% → 15% (9 yrs) | $268,800 | $63,000 | $1,076,100 |
| Max Out Immediately ($24,500/yr) | Flat $24,500 | $735,000 | $63,000 | $2,441,200 |
- 1Today: Log into your 401(k) portal (Fidelity, Vanguard, Empower, etc.) and find the “Contribution Rate Change” or “Auto-Escalation” setting. Many plans have this built in.
- 2Enable Auto-Escalation: Set it to increase by 1% every January 1st (or your plan anniversary date). The system does it automatically without requiring annual action.
- 3Set the Cap: Set the escalation ceiling at 15% or the IRS limit ($24,500) — whichever comes first. This prevents over-withholding if you forget to turn it off.
- 4If No Auto Feature: Set a calendar reminder every January 1st to manually increase by 1%. Tie it to your annual performance review or any raise — increase by the raise % first, then take the remaining from savings.
- 5Pro Move — Match Your Raise: Every time you get a merit raise, increase your contribution rate by the same percentage. Your take-home pay stays exactly the same as before the raise, but your 401(k) jumps dramatically.
Most 401(k) participants have never looked up their fund’s expense ratio. A 1.0% fee feels trivial — it’s $10 per $1,000. But compounded over 30 years, it doesn’t cost you 1% of your balance. It costs you 15–25% of your entire retirement savings, because every fee dollar is a dollar that never compounds again. The math is brutal and irreversible. The fix takes 5 minutes: switch to the lowest-cost index fund in your plan.
| Metric | Index Funds | Active Funds | Winner |
|---|---|---|---|
| Average Expense Ratio | 0.03%–0.20% | 0.50%–1.50% | Index ✅ |
| % That Beat Index Over 15 Years (SPIVA 2024) | N/A (IS the index) | Only 7–12% of funds | Index ✅ |
| Tax Efficiency (in taxable accounts) | Very High (low turnover) | Low (frequent trading) | Index ✅ |
| Predictability | Tracks market reliably | Manager-dependent | Index ✅ |
| 30-Year Net Return Advantage | +1.2% to +1.5%/yr net | Baseline | Index ✅ |
- 1Find Your Current Funds: Log into your 401(k) portal and view your current fund holdings. Note each fund’s full name (e.g. “Fidelity Blue Chip Growth Fund”).
- 2Look Up the Expense Ratio: Go to Morningstar.com and search your fund’s ticker symbol. The expense ratio is listed under “Fees.” Anything above 0.50% is a red flag.
- 3Find the Lowest-Cost Option: In your plan’s fund lineup, look for funds with “Index,” “Total Market,” or “S&P 500” in the name. Sort by expense ratio. The cheapest fund is almost always the best long-term choice.
- 4Reallocate: Change both your existing balance allocation AND your future contribution allocation to the low-cost index fund. Both steps are required — most platforms make them separate actions.
- 5Use the Fee Drag Analyzer: Enter your current expense ratio and the index fund rate in the Fees & Vesting tab above to see your exact lifetime fee savings in dollars.
The Roth vs. Traditional choice is not a single lifetime decision — it’s a dynamic strategy that should change as your income changes. The rule is simple: use Roth when you’re in a low bracket (pay tax now at a cheap rate), use Traditional when you’re in a high bracket (defer tax now and pay less later). The magic window between retirement at 65 and RMDs at 73 is the most powerful tax-planning period in a retiree’s life.
→ Maximize Roth. You’re in the lowest bracket of your life. Pay tax now at 10–12% while the rate is cheapest.
→ Split Traditional + Roth. The 22% bracket is the crossover zone — model both using the Roth vs. Traditional tab.
→ Maximize Traditional. You’re in peak earning years. Every pre-tax dollar saves 32–37 cents in federal tax.
→ Retired but RMDs haven’t started. Convert Traditional → Roth each year up to the top of the 12% or 22% bracket. Pay tax at low rates now to eliminate RMD risk.
→ Mandatory Traditional withdrawals begin. If your balance is large and mostly Traditional, RMDs could push you into the 22–32% bracket unexpectedly.
→ Roth accounts have NO RMDs during your lifetime. They pass to heirs tax-free and grow tax-free for 10 more years. The ultimate multi-generational wealth vehicle.
| Taxable Income Range | Rate | Roth or Traditional? | Rationale |
|---|---|---|---|
| $0 — $11,600 | 10% | 🟢 Roth — Strongly | Cheapest tax rate. Pay now. |
| $11,601 — $47,150 | 12% | 🟢 Roth — Strongly | Near-historically low rate. Roth wins. |
| $47,151 — $100,525 | 22% | 🟡 Model Both | Break-even zone — depends on retirement rate. |
| $100,526 — $191,950 | 24% | 🔵 Lean Traditional | Traditional saves 24 cents per dollar. Strong benefit. |
| $191,951 — $243,725 | 32% | 🔵 Traditional — Strongly | Maximum pre-tax savings. Defer now. |
| $243,726+ | 35–37% | 🔵 Traditional — Always | Every $1 deferred saves 35–37 cents today. |
According to Vanguard, approximately 41% of employees cash out their 401(k) when leaving a job — nearly always the wrong move. The immediate cost is a 10% federal penalty plus full income taxes. But the hidden cost — the permanent loss of compound growth on those dollars — is 10 to 15 times larger than the immediate tax bill. This is the most financially damaging mistake in personal finance.
| Action | Net Amount | Balance at Age 65 | 30-yr Loss vs. Rollover |
|---|---|---|---|
| Rollover to IRA / New 401(k) | $35,000 (100%) | $266,350 | Baseline ✅ |
| Cash out — reinvest after-tax proceeds | $22,050 (63%) | $167,700 | − $98,650 |
| Cash out — spend it all | $22,050 (spent) | $0 | − $266,350 |
| Cash out — plus the opportunity cost of the penalty + tax dollars | $12,950 (taxes/penalty) | $98,570 (if invested) | − $364,920 total opportunity cost |
- 1Do Nothing Immediately: When you leave a job, your 401(k) stays in the old plan for up to 60 days. Do not touch it. Do not cash out. Do nothing.
- 2Choose Your Rollover Destination: Option A — Roll to your new employer’s 401(k) (keeps it simple, one account). Option B — Roll to a Traditional IRA at Fidelity, Vanguard, or Schwab (more fund choices, lower fees often).
- 3Request a Direct Rollover: Tell your old plan to make the check payable directly to the new custodian (e.g. “Fidelity FBO Your Name”). Never take the check payable to you — the old plan will withhold 20% for taxes, and you have 60 days to replace that 20% from your own pocket or it’s treated as a distribution.
- 4Complete the Receiving Side: Open the IRA or contribute to the new 401(k) and provide the rollover instructions to the old plan. Most major custodians have a phone number specifically for incoming rollovers.
- 5Model the True Cost Before Deciding: Use the Job Change Cost Calculator in the RMD & Scenarios tab above — enter your balance, age, and tax rate to see exactly what cashing out will cost you vs. a rollover.
- Direct rollover to new employer’s 401(k) — one account, simple
- Direct rollover to Traditional IRA — more fund choices, often lower fees
- Leave in old employer plan (if balance > $5,000 and plan allows)
- Roll Roth 401(k) to Roth IRA — eliminates future RMDs, gains tax-free growth
- Never accept a check made payable to yourself — triggers 20% mandatory withholding
- Never miss the 60-day rollover window — becomes a taxable distribution
- Never cash out to pay off credit card debt — the math never works out
- Never assume the old plan will automatically notify you about small-balance force-outs
A 401(k) is a retirement savings plan sponsored by your employer. Contributions are deducted directly from your paycheck, and your employer may add a matching contribution. The plan is governed by IRS rules under Section 401(k) of the Internal Revenue Code.
An IRA (Individual Retirement Account) is opened independently by you at any brokerage — it’s not tied to an employer. The key differences:
| Feature | 401(k) | IRA (Traditional/Roth) |
|---|---|---|
| Who Opens It | Employer sponsors it | You open it yourself |
| 2026 Contribution Limit | $24,500 (+ catch-up) | $7,000 ($8,000 age 50+) |
| Employer Match | ✅ Often 50–100% match | ❌ No match |
| Investment Choices | Limited to plan’s fund menu | Nearly unlimited |
| Loan Option | ✅ Many plans allow loans | ❌ No loans allowed |
| Best Strategy | Contribute up to full match first | Max after 401k match captured |
To participate in a 401(k), you must be a W-2 employee of a company that sponsors a 401(k) plan. Independent contractors, freelancers, and self-employed sole proprietors cannot join an employer’s plan — but self-employed individuals can open a Solo 401(k) on their own.
Most plans require employees to be at least age 21 and to have completed 1 year of service (1,000+ hours) before enrolling. SECURE 2.0 lowered the part-time eligibility threshold: long-term part-time workers who complete 2 consecutive years with 500+ hours must now be allowed to participate starting in 2025.
Plans established after December 29, 2022 must automatically enroll eligible employees at a deferral rate of 3–10% with annual automatic escalation — though employees can opt out or adjust their rate.
A Traditional 401(k) contribution is deducted from your paycheck before federal and state income taxes are calculated. This directly reduces your taxable income for the year — saving you money at your marginal tax rate.
| Scenario | Without 401(k) | With $10,000 Contribution |
|---|---|---|
| Annual Gross Salary | $85,000 | $85,000 |
| 401(k) Contribution | $0 | $10,000 |
| Federal Taxable Income | $85,000 | $75,000 |
| Federal Tax (22% marginal) | $14,768 | $12,568 |
| Tax Saved | — | $2,200 |
| Real Cost of $10,000 Contribution | — | Only $7,800 from take-home |
Important: This is tax deferral, not tax elimination. You will pay income tax on every dollar you withdraw in retirement. The bet is that your retirement tax rate will be lower than your current rate — which is true for most people but not all.
Your 401(k) balance is completely safe if your employer goes bankrupt. Under ERISA (Employee Retirement Income Security Act), 401(k) assets are held in a trust that is legally separate from the employer’s business assets. Creditors cannot touch them.
When a company closes or goes bankrupt, the plan is typically terminated. You will receive a notice and have the option to either roll your balance into an IRA or your new employer’s 401(k), or take a distribution (which triggers taxes and penalties if you’re under 59½).
| Who | Employee Limit | Catch-Up | Combined (w/ Employer) |
|---|---|---|---|
| Under Age 50 | $24,500 | N/A | $72,000 |
| Age 50–59 | $24,500 | + $8,000 | $72,000 |
| Age 60–63 (Super Catch-Up) | $24,500 | + $11,250 | $72,000 |
| Age 64+ | $24,500 | + $8,000 | $72,000 |
| Solo 401(k) Self-Employed | $24,500 | + $8,000/$11,250 | $69,000 |
Yes — you can contribute to both a 401(k) and a Traditional or Roth IRA in the same year. They have entirely separate contribution limits and are tracked independently by the IRS.
Catch: If you (or your spouse) are covered by a workplace retirement plan like a 401(k), your ability to deduct a Traditional IRA contribution phases out at higher incomes. In 2026, the phase-out for a single filer covered by a workplace plan is $79,000–$89,000 MAGI. Above $89,000, you cannot deduct a Traditional IRA contribution — but you can still contribute to a Roth IRA (if your income is under $150,000 single / $236,000 married filing jointly).
There are two separate IRS limits that apply simultaneously to your 401(k):
1. Employee Elective Deferral Limit — $24,500: This is the maximum you personally can contribute from your paycheck (pre-tax Traditional + after-tax Roth combined). Add catch-up if age 50+.
2. Combined (Section 415) Limit — $72,000: This caps the total of ALL contributions into your account from ALL sources — your deferrals + employer match + employer profit-sharing + after-tax voluntary contributions combined. Most employees never hit this because their total is: e.g. $24,500 employee + $7,400 match = $31,900 — well under $72,000.
If you over-contribute to your 401(k) — typically by working two jobs both with 401(k) plans — the excess deferral must be returned to you by April 15 of the following year. If not corrected by that deadline, the excess is taxed twice: once in the year of contribution and again when ultimately distributed.
How it happens: The $24,500 employee limit applies per person, not per plan. If you contributed $15,000 at Job A and $12,000 at Job B, you’ve exceeded the limit by $2,500. Each plan doesn’t know about the other. You must contact one plan’s administrator to request an excess withdrawal.
The single deciding factor is: Will your tax rate be higher today or in retirement?
| Your Situation | Best Choice | Reason |
|---|---|---|
| Currently in 10% or 12% bracket | Roth | Tax rates are at their cheapest — pay now |
| Early career, income rising | Roth | Future brackets will likely be higher |
| Currently in 32–37% bracket | Traditional | Maximum pre-tax deduction value now |
| Peak earning years (ages 50–65) | Traditional | Defer high-rate taxes to lower-rate retirement |
| Texas, Washington, Florida resident | Roth | No state income tax to defer — Roth wins |
| Unsure / 22% bracket | Split Both | Hedge by doing some of each |
Use the Roth vs. Traditional tab in this calculator to compute your exact break-even tax rate and see which option produces more after-tax wealth at your specific income and retirement assumptions.
Yes, if your employer’s 401(k) plan offers a Roth option (most large plans do, smaller plans may not), you can split your contributions between Traditional (pre-tax) and Roth (after-tax) in the same plan — even in the same year.
The critical rule: your combined Traditional + Roth contributions cannot exceed the annual employee limit ($24,500 in 2026, or $32,500/$35,750 with catch-up). For example: $15,000 Traditional + $9,500 Roth = $24,500 total. ✅
This split-contribution strategy is popular with employees in the 22% bracket who want some tax savings today (Traditional portion) while also building some tax-free retirement income (Roth portion).
A Roth conversion is the process of moving money from a Traditional 401(k) or IRA to a Roth IRA. The converted amount is added to your taxable income in the year of conversion — you pay tax now, but all future growth and withdrawals are permanently tax-free.
Best time to convert:
• Ages 65–72: You’ve retired (lower income) but RMDs haven’t started yet. This “conversion window” allows you to convert Traditional funds at a lower tax rate than you paid during your working years — and dramatically reduce future RMD amounts.
• Low-income years: Layoffs, sabbaticals, or years with unusually low income — convert up to the top of the 12% bracket each year.
• Market downturns: Converting when your Traditional account balance is temporarily lower means you pay tax on fewer dollars to move the same number of shares.
The match formula is in your Summary Plan Description (SPD) — a legal document your employer must provide. Look for language like:
| Match Formula Language | Required Contribution | Annual Match (on $70k) |
|---|---|---|
| “50% of first 6% of salary” | You must contribute 6% | $2,100 |
| “100% of first 3% of salary” | You must contribute 3% | $2,100 |
| “100% of first 3%, 50% of next 2%” | You must contribute 5% | $2,800 |
| “50% of first 8% of salary” | You must contribute 8% | $2,800 |
The key number to find is the “ceiling” percentage — the percentage of salary up to which the employer will match. You must contribute at least that ceiling percentage to capture every available match dollar. Contributing less forfeits some match; contributing more has no additional match benefit (beyond that formula).
Vesting determines when employer contributions permanently belong to you. Your own contributions are always 100% vested immediately — you can never lose money you personally put in.
Employer match follows a vesting schedule. If you leave before full vesting, you forfeit the unvested portion. The three common types:
| Schedule Type | Vesting Timeline | Quit at Year 2 — Get? |
|---|---|---|
| Immediate | 100% from Day 1 | 100% of all match |
| 3-Year Cliff | 0% years 1–2, 100% year 3 | 0% of match — all forfeited |
| 4-Year Cliff | 0% years 1–3, 100% year 4 | 0% of match — all forfeited |
| 6-Year Graded | 20%/yr starting year 1 | 40% of accumulated match kept |
Use the Vesting Schedule Modeler in the Fees & Vesting tab to see exactly how much match you’d forfeit by leaving at any specific year.
A true-up provision means the employer calculates and pays the full annual match at year-end — even if your contributions were unevenly distributed throughout the year. Without a true-up, front-loading your contributions can cause you to miss some employer match.
Example without true-up: You max your $24,500 contribution in the first 8 months. You get match on those 8 months. For months 9–12 you contribute $0 (already maxed). Your employer contributes nothing for those 4 months — because there’s no payroll deferral to match. You lose 4 months of match.
Withdrawing before 59½ triggers a 10% federal penalty on the entire withdrawal amount plus ordinary federal and state income taxes. The combined tax hit is typically 30–47% of the withdrawal.
| Cost Component | $30,000 Withdrawal (22% bracket, 5% state) |
|---|---|
| Federal 10% Early Withdrawal Penalty | − $3,000 |
| Federal Income Tax (22%) | − $6,600 |
| State Income Tax (5%) | − $1,500 |
| Net Cash Received | $18,900 (63%) |
| Compound Growth Lost Over 30 Years (7%) | $228,360 |
Penalty exceptions exist for: death, permanent disability, substantially equal periodic payments (Rule 72(t)), certain medical expenses, qualified domestic relations order (divorce), federal tax levy, and SECURE 2.0’s new $1,000/year emergency withdrawal. Use these as absolute last resort — the compound growth loss is permanent.
A Required Minimum Distribution (RMD) is the minimum amount the IRS forces you to withdraw from Traditional 401(k) accounts each year starting at age 73 (rising to 75 in 2033). The RMD is calculated by dividing your year-end account balance by an IRS life expectancy factor from the Uniform Lifetime Table.
Example: At age 75, the IRS life expectancy factor is 24.6. If your balance is $1,200,000: RMD = $1,200,000 ÷ 24.6 = $48,780 that year — taxable as ordinary income.
The penalty for failing to take an RMD was 50% of the missed amount — SECURE 2.0 reduced it to 25%, further reduced to 10% if corrected within 2 years. Still severe. Use the RMD Planner tab to model your annual RMD amounts and their tax impact.
Many (not all) 401(k) plans allow loans of up to 50% of your vested balance or $50,000 — whichever is less. You repay yourself with interest (typically Prime + 1%) via payroll deduction over up to 5 years (longer for home purchase).
The hidden costs people miss:
1. Your borrowed money is out of the market during the repayment period — losing years of compound growth on that balance.
2. You repay with after-tax dollars — then that money is taxed again at withdrawal. Double taxation on the interest portion.
3. If you leave your job, the entire outstanding balance is due by your tax filing deadline (typically April 15). If you can’t repay, the outstanding balance becomes a taxable distribution — plus the 10% penalty if you’re under 59½.
The SECURE 2.0 Act of 2022 made the most sweeping changes to US retirement law since the original SECURE Act of 2019. Here are the provisions most directly affecting 401(k) participants in 2026:
| Provision | Change | Effective |
|---|---|---|
| RMD Start Age | Raised from 72 → 73 (→ 75 in 2033) | 2023 |
| Mandatory Roth Catch-Up | Age 50+ earning $150k+ must use Roth catch-up | 2026 |
| Super Catch-Up (Ages 60–63) | Extra $11,250 catch-up instead of $8,000 | 2025 |
| Auto-Enrollment Mandate | New plans must auto-enroll at 3–10% | 2025 |
| Emergency Withdrawals | $1,000/yr penalty-free emergency distribution | 2024 |
| Student Loan Match | Employers can match student loan payments as 401k match | 2024 |
| Roth RMD Elimination | Roth 401(k) no longer subject to lifetime RMDs | 2024 |
The super catch-up is a SECURE 2.0 provision allowing employees who are specifically ages 60, 61, 62, or 63 to contribute an enhanced catch-up amount. In 2026, that’s $11,250 instead of the standard $8,000 catch-up.
Total employee limit for ages 60–63 in 2026: $24,500 base + $11,250 super catch-up = $35,750
Important timing facts: The super catch-up applies in the calendar years you are ages 60–63. The year you turn 64, you revert to the standard $8,000 catch-up. If you are 59 in 2026, you can only use the standard $8,000. If you are 63 in 2026, this is your last year of super catch-up — maximize it.
A Solo 401(k) (also called Individual 401k or Self-Employed 401k) is available to any self-employed person with no full-time employees other than themselves and their spouse. It allows contributions as both employee and employer:
| Contribution Type | 2026 Limit | Example ($150k net SE income) |
|---|---|---|
| Employee Elective Deferral | $24,500 (+ $8k/$11.25k catch-up) | $24,500 |
| Employer Profit-Sharing | Up to 25% of net compensation | $26,770 (25% of $107,100*) |
| Combined Maximum | $69,000 (not $72,000 — lower cap) | $51,270 total |
*Net compensation for employer contribution = net SE income − ½ SE tax deduction
The Solo 401(k) deadline to establish the plan is December 31 of the tax year. Contributions can be made up to your tax filing deadline including extensions (October 15). At Fidelity, Vanguard, and Schwab, a Solo 401(k) can be opened online with no setup fee.
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