How 401(k) growth works
A 401(k) builds wealth through two engines: regular contributions and compound growth. Each year you contribute a slice of your salary, your employer often adds a match, and the entire balance earns an investment return. Next year, that return earns its own return — the snowball effect that makes starting early so powerful.
Don't leave the match on the table
An employer match is an immediate, guaranteed return on your money. A 50% match on the first 6% of salary means that for every dollar you put in (up to the cap), your employer adds fifty cents. Contributing at least enough to get the full match is one of the highest-return moves available to most workers.
Why starting early matters
Because growth compounds, a dollar saved at 25 can be worth several times a dollar saved at 45. Even modest contributions in your twenties often outweigh larger ones later, simply because they have more years to grow. If you're starting later, higher contribution rates can help make up ground.
A quick example
Suppose you're 30 with $25,000 saved, earning $70,000, contributing 6% with a 50% employer match (up to 6%) and a 7% return. By 65 you could have roughly $1.14 million — yet you'd have personally contributed only about $147,000. The other ~$890,000 is employer match plus pure investment growth, which shows just how much the compounding does the heavy lifting.
Frequently asked questions
How does a 401(k) grow over time?
Each year you and your employer add money, and the whole balance earns a return that compounds. Because returns build on prior returns, contributions made early in your career typically grow the most. This calculator adds contributions and the employer match every year and compounds the balance at your expected rate.
How does employer matching work?
Many employers match part of what you contribute — for example, 50% of your contributions up to 6% of your salary. That match is free money on top of your own savings. This calculator applies the match percentage to your contribution, capped at the percent-of-salary limit you enter.
How much should I contribute to my 401(k)?
A common guideline is to contribute at least enough to capture the full employer match, then work toward 10–15% of your salary including the match. The more you contribute early, the more time compounding has to work. IRS annual contribution limits also apply.
What rate of return should I assume?
Long-run stock-market returns have averaged roughly 7% per year after inflation, though any single year varies widely. A 6–7% assumption is common for projections, but use a lower figure for a conservative estimate. This tool shows nominal growth at whatever rate you enter.
Disclaimer: Results are estimates for educational purposes only and are not financial advice. Investment returns are not guaranteed, and actual results depend on markets, fees, and IRS contribution limits.