401(k) Growth Calculator

The Greatest Wealth Building Tool in America

In 1978, the United States Congress passed the Revenue Act, which included an obscure subsection named 401(k). At the time, it was intended to be a minor tax loophole for executives. Today, it has become the undisputed backbone of the American retirement system, replacing the traditional corporate pension.

A 401(k) is an employer-sponsored, defined-contribution retirement account. It allows employees to automatically funnel a percentage of their paycheck directly into the stock market before the government takes taxes out of it. Because the money is invested pre-tax, it compounds at a radically faster rate than a standard brokerage account.

The Magic of the Employer Match

If your company offers a 401(k) match, it is the single most important financial benefit you have. An employer match is literally 100% risk-free, guaranteed free money.

Traditional 401(k) vs. Roth 401(k)

Many modern employers now offer a choice between a Traditional 401(k) and a Roth 401(k). The decision comes down to exactly when you want to pay taxes to the government.

In a Traditional 401(k), you do not pay taxes today. The money grows tax-free for decades. However, when you retire at age 60 and start withdrawing the money to live on, the government will tax those withdrawals as ordinary income.

In a Roth 401(k), you pay the taxes upfront today. However, the money then grows tax-free forever, and when you retire at age 60, every single dollar you withdraw is 100% tax-free. Generally, if you believe you are in a lower tax bracket today than you will be in retirement, Roth is the mathematically superior choice.