Retirement

What Is a 401(k)? Contributions and Employer Match

A 401(k) is a U.S. employer-sponsored retirement plan that lets eligible employees contribute part of their pay to a tax-advantaged retirement account.

Also called: 401k; 401(k) retirement plan.

How it works

Traditional pre-tax employee contributions generally defer federal income tax until withdrawal. A plan may also offer designated Roth contributions, made with after-tax pay; qualified Roth withdrawals are generally tax-free. Employers may add matching contributions under the plan’s formula. Your own elective deferrals are fully vested, while some employer contributions become yours over a vesting schedule.

Illustrative employer match = salary × min(employee contribution rate, matched salary percentage) × match rate

This describes a simple single-tier match before legal and plan limits. Actual plans may use different tiers, eligibility, payroll timing and vesting rules.

A 50% match on the first 6% of salary

Suppose the plan matches half of your contributions up to 6% of an eligible $50,000 annual salary, and you contribute 6%.

Your annual contribution: $50,000 × 6% = $3,000.
Employer contribution: $50,000 × 6% × 50% = $1,500.
Together, the deposits total $4,500 before any investment return.

The 50% match adds $1,500. It does not mean the employer contributes 50% of your salary.

A one-year arithmetic illustration using projection ages 30–31, a zero opening balance and zero return. It assumes eligibility, full vesting and no applicable cap reduction; the projection is before tax and fees.

Try these example inputs

The account’s tax treatment is not its investment return

Investment performance depends on the assets selected. Contribution limits change by year, and early withdrawals may face taxes and additional charges. Check the current IRS guidance and your plan document. Our projection states its modeled limit year and assumes full vesting; it does not determine your personal eligibility or traditional-versus-Roth tax outcome.

Explore with a calculator

401K Calculator
Project employee contributions, employer matching and a hypothetical retirement balance.
Retirement Calculator
Explore retirement savings and withdrawal assumptions beyond one account type.

Sources and checks

Definition and example arithmetic checked October 22, 2026. Sources explain the concepts; numerical examples use the assumptions stated above.

Calculation methodology and review status · All glossary terms