This shows one year. See how these contributions compound over a whole career:
| # | Gross | Fed tax | State tax | Soc. Sec. | Medicare | 401(k) | Match | Take-home |
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How a 401(k) contribution is leveraged
A 401(k) is unusual because you rarely fund the whole thing yourself. Three forces do part of the work. Say you contribute $10,000. Your employer might add a $3,000 match. Because the contribution is pre-tax, it also cuts your income taxes — perhaps $2,500 — so it doesn't actually reduce your take-home by the full $10,000. Put together, about $7,500 out of your own pocket turns into $13,000 going into your account. That multiplier is what the tiles and the "leverage" chart above show for your own numbers.
Free money: the employer match
Many employers offer a matching contribution — a common form is "50% of the first 6% of pay," meaning if you put in 6% of salary, the employer adds another 3%. That match is the closest thing to free money in personal finance, and not capturing all of it is one of the most common money mistakes.
There's a catch worth knowing. Many plans figure the match each paycheck, not once for the year. If a paycheck has no contribution, it earns no match — so contributing too little, or finishing early after front-loading, can forfeit part of the match. Some employers fix this with an annual true-up that pays whatever you missed after year-end. Whether your plan trues up is worth asking your HR team; toggle the box in the inputs to see the difference.
Percent or dollars per paycheck — and why "more" can backfire
Most employers ask you to elect either a percent of each paycheck or a fixed dollar amount per paycheck. Either way, payroll deducts that same figure every payday and simply stops once you reach the annual IRS limit — it does not quietly lower your rate to spread the money evenly. So a high election (say 30% of a $180,000 salary) fills the limit by around mid-year and then contributes nothing, which is front-loading. If your match is per-paycheck with no true-up, that can cost you the second half of the year's match. To spread contributions evenly instead, pick the rate that lands you at the limit on your last paycheck — roughly the annual limit divided by your salary. That's the sweet spot the slider snaps to.
The contribution limit and the age-50 catch-up
The IRS caps how much you can defer from your own pay each year — $24,500 in 2026. This limit is per person and tied to your own plan; being married does not raise it. Starting in the year you turn 50, a catch-up contribution lets you add $8,000 more, for a total of $32,500. Under a newer rule, workers aged 60 to 63 can add even more (up to $35,750 in 2026). The employer match does not count against these limits — they apply only to the money you contribute.
Tax savings: why a dollar costs less than a dollar
A traditional 401(k) contribution is pre-tax: it comes out of your pay before income tax is figured, lowering your taxable income for the year. The money you save is your contribution times your marginal tax rate — the rate on your top dollars of income — counting both federal and, in most states, state income tax. A $10,000 contribution for someone in a 22% federal bracket and a 5% state saves roughly $2,700 in tax, so it only costs about $7,300 of take-home. You will owe income tax on this money later, when you withdraw it in retirement.
State income tax
Most states charge their own income tax on top of federal. Nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) have no broad income tax; set the rate to 0 for those. This tool uses a single flat rate you enter — a simplification, since real state taxes have their own brackets, deductions, and credits.
In nearly every state a 401(k) contribution lowers state taxable income just as it lowers federal, so it cuts your state tax too. Pennsylvania is essentially the only exception — it taxes 401(k) contributions in the year you make them, though it doesn't tax the withdrawals later (Pennsylvania Department of Revenue). New Jersey is sometimes named alongside it, but NJ taxes 403(b) contributions, not 401(k)s. If Pennsylvania is your state, check the "My state taxes 401(k) contributions" box so the estimate skips the state savings.
One thing a 401(k) does not lower: payroll tax
Income tax is one thing; payroll tax is another. Social Security (6.2%) and Medicare (1.45%) are charged on your full pay whether or not you contribute to a 401(k). So a contribution trims your income tax, but not your payroll tax — that's why the tax savings here are smaller than your full contribution times your bracket.
Key takeaway
A 401(k) combines three advantages: the employer match, income-tax savings today, and decades of tax-deferred growth later. The first step is simple — contribute enough, in the right pattern, to capture your full match. After that, the tax savings mean each dollar you invest costs you less than a dollar of take-home, while more than a dollar lands in your account.