1. What is 401k Contribution?

A 401k contribution is the amount of money deducted from your paycheck and deposited into your 401k retirement account. The contribution is typically a percentage of your gross paycheck amount.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Paycheck \) — Your gross paycheck amount before deductions
• \( Percentage \) — The percentage you want to contribute to your 401k

Explanation: The calculation converts the percentage to a decimal and multiplies it by your paycheck amount to determine the contribution.

3. Importance of 401k Contributions

Details: Regular contributions to a 401k account help build retirement savings with potential tax advantages and often employer matching contributions.

4. Using the Calculator

Tips: Enter your paycheck amount in dollars and your desired contribution percentage. Both values must be positive numbers (percentage between 0-100).

5. Frequently Asked Questions (FAQ)

Q1: What's the maximum 401k contribution limit?
A: For 2023, the IRS limit is $22,500 ($30,000 if age 50+). Employer matches don't count toward this limit.

Q2: Should I contribute pre-tax or Roth?
A: Pre-tax reduces taxable income now; Roth offers tax-free withdrawals in retirement. The best choice depends on your current vs. expected future tax rate.

Q3: How does employer matching work?
A: Many employers match a portion of your contributions (e.g., 50% of first 6% of salary). Always contribute enough to get the full match.

Q4: When can I withdraw from my 401k?
A: Typically at age 59½ without penalty. Early withdrawals usually incur a 10% penalty plus income taxes.

Q5: How often should I adjust my contribution percentage?
A: Review annually or when your financial situation changes. Aim to increase contributions with raises.