401(k) Calculator

A Traditional 401(k) accepts pre-tax contributions that reduce your current taxable income. A $24,500 contribution at a 24% marginal tax rate saves $5,880 in federal income tax for the current year. Withdrawals in retirement are taxed as ordinary income. A Roth 401(k) uses after-tax dollars — no upfront deduction — but qualified withdrawals after age 59 1/2 (with the account open at least 5 years) are 100% tax-free, including all investment gains.

The break-even decision hinges on your current marginal tax rate versus your expected retirement tax rate. If you expect to be in a lower bracket in retirement (common for high earners near peak salary), Traditional wins. If you are early in your career at a 12% or 22% bracket and expect income growth, Roth contributions lock in today's lower rate. Many advisors recommend a mix for tax diversification in retirement.

Early withdrawal penalties apply to distributions taken before age 59 1/2: a 10% IRS penalty on top of ordinary income tax for Traditional balances. Exceptions include the Rule of 55 (penalty-free if you separate from service at age 55 or later), substantially equal periodic payments under IRC Section 72(t), and hardship withdrawals for medical expenses exceeding 7.5% of AGI. Beginning in 2024, the SECURE 2.0 Act added a $1,000 emergency withdrawal option once per year without penalty.

Required Minimum Distributions (RMDs) must begin at age 73 for both Traditional and Roth 401(k) balances (the SECURE 2.0 Act eliminated Roth 401(k) RMDs starting in 2024, but only when the funds remain in the plan — rolling to a Roth IRA eliminates RMDs entirely during the owner's lifetime).

Self-employed individuals and small business owners without full-time employees (other than a spouse) can open a Solo 401(k), also called an individual 401(k). The 2026 total contribution limit mirrors the standard plan: up to $72,000 (or $80,000 with catch-up). The structure splits into an employee deferral of $24,500 (or $32,500 for age 50+) plus an employer profit-sharing contribution of up to 25% of net self-employment income (after the SE tax deduction).

For a sole proprietor earning $150,000 net, the employer portion caps at approximately $34,600 (20% of net SE income after the deduction adjustment), plus the $24,500 employee deferral, for a combined $59,100. Adding catch-up contributions for those 50+ pushes it to $67,100. Solo 401(k) plans also allow Roth contributions on the employee deferral side and permit participant loans of up to $50,000 or 50% of the vested balance.

The projections above assume 7% average annual return (the inflation-adjusted historical average for a diversified equity portfolio) compounded over 30 years. Starting 10 years earlier with the same contribution doubles the outcome: $10,000/year for 40 years at 7% grows to approximately $2,139,000 versus $1,010,730 at 30 years. Safe harbor 401(k) plans automatically satisfy IRS nondiscrimination testing by either matching 100% of the first 3% of compensation plus 50% of the next 2%, or making a 3% non-elective contribution to all eligible employees regardless of participation.