401(k) Tax Savings Calculator
See exactly how much a traditional 401(k) contribution saves in taxes and what it actually costs you after the tax break.
A 401(k) contribution with an employer match is the best guaranteed return available to most people. Contributing $10,000 to a 401(k) in the 22% federal bracket with 5% state tax costs about $7,300 after tax savings, receives a $2,500 employer match (50% of 6% of $80,000), and puts $12,500 to work immediately. That is a 71% immediate return before any investment growth. Nothing else in personal finance comes close.
Always contribute enough to capture the full employer match before anything else. Leaving employer match on the table is declining free money. It is the only guaranteed 50-100% immediate return in personal finance.
Why the 401(k) tax break is larger than it looks
Traditional 401(k) contributions reduce federal income tax, state income tax (in most states), and FICA taxes (Social Security and Medicare on the income saved). A $10,000 contribution in the 22% federal bracket with 5% state tax and 7.65% FICA saves: $2,200 + $500 + $765 = $3,465 in combined taxes. The net cost of contributing $10,000 is $6,535. You put $10,000 to work for $6,535 in reduced take-home pay.
Employer match mechanics
The most common match structure is 50% of the first 6% of salary. On an $80,000 salary, 6% is $4,800. The employer matches 50% of that, adding $2,400. To receive the full match, you must contribute at least $4,800 (6% of salary). Contributing less than 6% leaves match dollars on the table. Contributing more than 6% generates no additional match under this structure.
2025 contribution limits
Employee contribution limit: $23,500. Catch-up contribution (age 50+): additional $7,500 ($31,000 total). The combined employee + employer total limit is $70,000 for 2025. Employer contributions do not reduce your personal contribution limit.
Frequently asked questions
Should I contribute to traditional 401(k) or Roth 401(k)?
Traditional 401(k): pre-tax contributions, taxed at withdrawal. Better if current tax rate exceeds retirement rate. Roth 401(k): after-tax contributions, tax-free growth and withdrawal. Better if retirement tax rate exceeds current rate. Many plans allow splitting between both. Use the Roth vs Traditional IRA Calculator for the full comparison logic, which applies equally to 401(k) versions.
What happens to my 401(k) if I leave my job?
Vested contributions are yours permanently. Unvested employer contributions may be forfeited depending on the vesting schedule. You can roll the balance to your new employer's plan or an IRA without tax consequences. Cashing out triggers ordinary income tax plus a 10% early withdrawal penalty if under 59.5.