How are 401(k) withdrawals taxed in retirement?

Traditional 401(k) withdrawals are taxed as ordinary income at your marginal tax rate in the year of withdrawal. Roth 401(k) withdrawals are generally tax-free if the account has been open at least five years and you are at least 59½. This calculator lets you input an estimated retirement tax rate to approximate the after-tax value of your 401(k).

How do fees affect my 401(k) balance?

Even small annual fees can significantly reduce your long-term 401(k) balance because they compound over time. For example, a 1% annual fee on a portfolio earning 7% gross reduces your net return to 6%. Over 30 years, that difference can reduce your ending balance by tens of thousands of dollars. The calculator includes an explicit annual fee input so you can see the impact.

401(k) Calculator

Q: How much should I contribute to my 401(k)?

A common rule of thumb is to contribute at least enough to get the full employer match, because that is essentially free money. Many planners suggest targeting 10–15% of your gross income across all retirement accounts, including your 401(k), IRAs, and other plans. The right number for you depends on your age, current savings, expected retirement age, and other income sources.

Q: What is a good 401(k) balance by age?

Rough benchmarks often cited by financial planners are: by age 30, about 1x your annual salary; by 40, 3x; by 50, 6x; by 60, 8x; and by retirement, 10x or more. These are only rough guidelines. Use the calculator to see whether your current savings rate is likely to reach your personal target.

Q: What is the difference between traditional and Roth 401(k)?

Traditional 401(k) contributions are made pre-tax, which reduces your taxable income today. Withdrawals in retirement are taxed as ordinary income. Roth 401(k) contributions are made with after-tax money, so they do not reduce your current taxable income, but qualified withdrawals in retirement are tax-free. Which is better depends mainly on whether you expect your tax rate to be higher or lower in retirement.

Project your 401(k) balance with employer match, Roth vs. traditional contributions, fees, and inflation. See how much you could have at retirement and what that means in today’s dollars.

Current age

Retirement age

Current 401(k) balance ($)

Annual salary ($)

Your contribution (% of salary)

10%

Employer match (% of salary)

Assumes match up to your contribution, capped at this % of salary.

Expected annual investment return (before fees)

Annual fees (expense ratio, admin)

0.5%

Inflation rate

2.5%

Estimated tax rate in retirement (traditional 401(k))

22%

Contribution type

Traditional 401(k) Roth 401(k) 50% Traditional / 50% Roth

Results

Total at retirement (nominal)

Before taxes and inflation.

After-tax value (traditional)

Assumes retirement tax rate you entered.

In today’s dollars

Adjusted for inflation.

Your total contributions

Employer contributions

Growth from investment returns

Estimated sustainable annual withdrawal (4% rule)

$0 / year

Rough rule of thumb: withdrawing ~4% of your portfolio per year may be sustainable over a 30-year retirement, but this is not a guarantee.

Show year‑by‑year projection

Age	Salary	Your contrib	Employer	End balance

How this 401(k) calculator works

This 401(k) calculator estimates how much you could accumulate by retirement based on your current balance, contributions, employer match, investment returns, fees, and inflation. It is designed to be transparent: you can see the year‑by‑year schedule and adjust advanced assumptions like salary growth and IRS limits.

1. Annual contributions

For each year until retirement, the calculator estimates:

Your contribution = salary × your contribution % (capped by the IRS annual limit you enter, plus optional catch‑up after age 50).
Employer match = min(your contribution %, employer match cap) × salary, limited by the employer match % and match cap you specify.

Your contribution (year t)

$ C_{\text{you},t} = \min\big( s_t \times p_{\text{you},t}, \text{IRS limit}_t \big) $

Employer match (year t)

$ C_{\text{er},t} = s_t \times \min(p_{\text{you},t}, p_{\text{match cap}}) $

where $ s_t $ is salary in year t and $ p $ values are percentages expressed as decimals.

2. Investment growth and fees

The calculator compounds your 401(k) balance annually using a net return equal to your expected return minus annual fees:

Net annual return

$ r_{\text{net}} = r_{\text{gross}} - f $

End‑of‑year balance

$ B_{t+1} = (B_t + C_{\text{you},t} + C_{\text{er},t}) \times (1 + r_{\text{net}}) $

Even small fees (for example 0.5–1.0% per year) can significantly reduce your ending balance over decades, which is why this input is explicit.

3. Inflation and “today’s dollars”

To show the purchasing power of your future 401(k), the calculator discounts the nominal balance by your inflation assumption:

$ B_{\text{real}} = \dfrac{B_{\text{nominal}}}{(1 + i)^n} $

where $ i $ is the annual inflation rate and $ n $ is the number of years until retirement.

4. Traditional vs. Roth 401(k)

The contribution type setting affects how the calculator displays after‑tax values:

Traditional 401(k) – contributions are pre‑tax; withdrawals are taxed at the retirement tax rate you enter. The calculator multiplies the final balance by (1 − tax rate) to estimate after‑tax value.
Roth 401(k) – contributions are after‑tax; qualified withdrawals are tax‑free. The calculator treats the full balance as after‑tax.
50% Traditional / 50% Roth – assumes half of your contributions are traditional and half are Roth, and blends the after‑tax value accordingly.

5. Sustainable withdrawal estimate

As a rough planning aid, the calculator applies the commonly cited “4% rule”:

$ \text{Annual withdrawal} \approx 0.04 \times B_{\text{after‑tax}} $

This is not a guarantee; actual safe withdrawal rates depend on market returns, inflation, and your time horizon.

Interpreting your 401(k) results

Am I on track for retirement?

Compare the estimated sustainable annual withdrawal to your expected spending in retirement. If the withdrawal covers only a small portion of your target budget, you may need to:

Increase your contribution rate (especially up to the full employer match).
Work longer or delay retirement.
Adjust your investment mix (for example, more stocks for higher expected return, with higher risk).
Save in additional accounts (IRAs, taxable brokerage, HSA, etc.).

How much should I contribute to my 401(k)?

Many planners suggest aiming for 10–15% of gross income toward retirement across all accounts. At a minimum, try to contribute enough to receive the full employer match, since that is effectively a guaranteed return.

Traditional vs. Roth 401(k): which is better?

Traditional 401(k) may be better if you are in a high tax bracket now and expect to be in a lower bracket in retirement.
Roth 401(k) may be better if you are early in your career, in a relatively low tax bracket, or expect higher taxes in the future.
A mix of both can provide tax diversification and flexibility later.

Limitations and important notes

This tool uses constant average annual returns; real markets are volatile and unpredictable.
It does not model required minimum distributions (RMDs), early withdrawal penalties, or Social Security benefits.
IRS contribution limits and tax rules change over time; always verify current limits with the IRS or a qualified professional.
This calculator is for education and planning, not personalized investment or tax advice.

401(k) FAQ

How much should I contribute to my 401(k)?

At a minimum, contribute enough to receive the full employer match. If your employer matches 100% of the first 4% of pay, try to contribute at least 4%. If possible, aim for 10–15% of your income across all retirement accounts. Use the calculator to see how different contribution rates change your projected balance.

What is a good 401(k) balance by age?

Rough benchmarks sometimes used by planners are:

Age 30: ~1× your annual salary
Age 40: ~3× salary
Age 50: ~6× salary
Age 60: ~8× salary
Retirement: ~10× salary or more

These are only guidelines. Your target depends on your lifestyle, other savings, and whether you expect income from pensions, Social Security, or part‑time work.

What is the difference between traditional and Roth 401(k)?

Traditional 401(k) contributions are made pre‑tax, lowering your taxable income today; withdrawals are taxed later. Roth 401(k) contributions are made after tax, but qualified withdrawals are tax‑free. The calculator lets you compare after‑tax values under different assumptions.

How are 401(k) withdrawals taxed?

Traditional 401(k) withdrawals are taxed as ordinary income. Roth 401(k) withdrawals are generally tax‑free if you meet the age and holding requirements. Early withdrawals (before age 59½) may incur penalties and additional taxes; this calculator does not model those penalties.

How do fees affect my 401(k)?

Annual fees reduce your net return. For example, if your investments earn 7% before fees and your plan charges 1% per year, your net return is 6%. Over 30+ years, that difference can reduce your ending balance by tens or hundreds of thousands of dollars. Use the “Annual fees” slider to see the impact.