IRA vs. 401(k) Calculator
The IRA vs. 401(k) Calculator helps you compare the features, benefits, and potential growth of an Individual Retirement Account (IRA) versus a 401(k) plan. By entering details such as contribution amounts, expected returns, and tax implications, you can assess which retirement account may be more advantageous for your financial goals. This tool empowers you to make informed decisions about your retirement savings strategy and choose the best option for your future. Start comparing your IRA and 401(k) options today!
Future Value Of I R A
$1,106,625.10
Future Value Of401k
$1,918,577.26
How to Use This Calculator
- 1
Enter Your Current IRA Balance
Input the current balance of your Individual Retirement Account.
- 2
Enter Your Current 401(k) Balance
Input the current balance of your employer-sponsored 401(k) plan.
- 3
Set Annual Contributions for Each Account
Enter the amount you plan to contribute each year to both the IRA and the 401(k).
- 4
Enter the Annual Growth Rate and Time Horizon
Input the expected annual rate of return and the number of years until retirement.
- 5
Enter Employer Match Details
Input your employer's match percentage and the maximum dollar amount they will match on your 401(k).
- 6
Compare Future Values
Review the projected future value of both accounts side by side.
Example Calculation
A 35-year-old professional compares maxing out an IRA versus contributing to a 401(k) with employer match over 20 years.
Current IRA Balance
$40,000
Current 401(k) Balance
$60,000
Annual IRA Contribution
$6,000
Annual 401(k) Contribution
$10,000
Annual Growth Rate
7%
Number of Years
20
Employer Match
50%
Match Cap
$5,000
Result
Future Value of IRA: approximately $401,572. Future Value of 401(k): approximately $587,380 (including $100,000 in employer match contributions). The 401(k) comes out ahead largely because of the employer match benefit.
Tips
Always Capture the Full Employer Match
Contribute at least enough to your 401(k) to get the maximum employer match. It is an immediate 50-100% return on your money that no IRA can replicate.
Use Both Accounts if Possible
After capturing the full 401(k) match, consider funding a Roth IRA for tax diversification, then return to the 401(k) for additional pre-tax savings.
Review 401(k) Investment Options
Some 401(k) plans have limited or high-fee fund choices. If your plan's expense ratios exceed 0.75%, the IRA's broader fund selection may partly offset the match advantage.
Account for 2025 Contribution Limits
The 2025 IRA limit is $7,000 ($8,000 if 50+) while the 401(k) limit is $23,500 ($31,000 if 50+). Higher 401(k) limits allow significantly more tax-advantaged saving.
Frequently Asked Questions
What are the IRA and 401(k) contribution limits for 2025?
For 2025, the IRA contribution limit is $7,000 ($8,000 if 50+). The 401(k) employee deferral limit is $23,500 ($31,000 if 50+). The total 401(k) limit including employer contributions is $70,000.
Is an IRA or 401(k) better for retirement savings?
It depends on your situation. A 401(k) is generally better if your employer offers a match. An IRA typically offers wider investment selection and potentially lower fees. The ideal strategy is to contribute enough to the 401(k) for the full match, then fund an IRA, then direct additional savings back to the 401(k).
How does an employer 401(k) match work?
An employer match means your company contributes additional money based on your own contributions. A common formula is 50% of employee contributions up to 6% of salary. The match is subject to a vesting schedule, meaning you may need to work a certain number of years before you fully own the employer contributions.
Can I contribute to both an IRA and a 401(k) in the same year?
Yes. You can contribute to both up to their respective limits. However, if you are covered by an employer plan, your ability to deduct traditional IRA contributions may be limited based on income. Roth IRA contributions have separate income limits.