Savings
Compound interest: 401(k) Retirement Account
How money grows in a 401(k) Retirement Account, with realistic rate assumptions and key context.
Typical parameters
| Parameter | Value |
|---|
| Typical annual rate | 7% |
| Compounding frequency | annual |
| 10-year growth on $10,000 | $19,672 |
| 30-year growth on $10,000 | $76,123 |
A 401k is a tax-advantaged employer-sponsored retirement account. Contributions are pre-tax (traditional) or post-tax (Roth), and gains grow tax-deferred. Contribution limits are adjusted by the IRS most years (2024: $23,000, or $30,500 if 50+) — check irs.gov for the current-year limit. Employer matching is free money — contribute at least enough to capture the full match before investing elsewhere. Funds are typically invested in mutual funds or ETFs within the account.
Best use: Key advantage: employer match + tax deferral. Always contribute enough to capture the full employer match first.
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