401k Growth Formula
where PV = current balance, C = annual contribution + match
r = annual return rate, n = years to retirement
2026 401k Contribution Limits
| Contribution Type | 2026 Limit |
|---|---|
| Employee contribution (under 50) | $23,500 |
| Catch-up contribution (age 50–59, 64+) | +$7,500 = $31,000 |
| Enhanced catch-up (age 60–63) | +$11,250 = $34,750 |
| Total incl. employer (415 limit) | $70,000 |
| IRA (Traditional or Roth) | $7,000 (+$1,000 catch-up) |
Employer Match Examples
| Match Type | Example | Max Free Money |
|---|---|---|
| Dollar-for-dollar | 100% up to 3% salary | 3% of salary |
| Partial match | 50% up to 6% salary | 3% of salary |
| Tiered | 100% on first 3%, 50% on next 2% | 4% of salary |
| No match | 0% | $0 |
Frequently Asked Questions
What return rate should I use?
A common assumption is 6–8% average annual return for a diversified stock-heavy portfolio, accounting for inflation (real return). The S&P 500 has averaged ~10% nominal or ~7% real over long periods. Conservative portfolios (more bonds) might use 4–5%. Use 6% for a reasonable middle estimate.
Should I contribute to a traditional or Roth 401k?
Traditional 401k: contributions are pre-tax (lower tax bill now), but withdrawals in retirement are taxed. Roth 401k: contributions are post-tax (no tax break now), but withdrawals in retirement are tax-free. If you expect to be in a higher tax bracket in retirement, Roth is better. If lower bracket in retirement, traditional wins. Many financial advisors suggest splitting contributions.
What is the employer match vesting schedule?
Vesting determines when employer contributions become fully yours. Immediate vesting: you own match right away. Cliff vesting: 100% ownership after X years (e.g., 3 years). Graded vesting: gradual ownership increase (e.g., 20% per year for 5 years). Check your plan document — leaving before full vesting means losing some employer contributions.