401(k) Tax Savings Simulator: What Does Bumping Your Contribution Actually Cost?

The hidden math of 401(k) contributions

Most people see two questions and only answer one: "how much can I afford to put away each month?" The IRS answers a second question for you in the background — every dollar you contribute pre-tax escapes your marginal bracket. At a 22% marginal rate, a $10,000 contribution doesn't cost you $10,000 — it costs you $7,800 in real take-home and the government effectively co-pays the other $2,200.

This calculator does both halves at once: shows the tax saving in this year and what that same dollar grows into across your remaining career. A small bump from 10% to 12% on a $100K salary looks tiny on the paycheck but compounds to tens of thousands by retirement — the kind of asymmetric tradeoff that gets missed when you only stare at one timescale.

How the math works

Federal income tax uses the 2025 IRS progressive brackets for single filers (10%/12%/22%/24%/32%/35%/37%). Standard deduction is $15,000. We compute tax on gross − standard deduction first, then on gross − contribution − standard deduction, and the difference is your tax saving.

Out-of-pocket is contribution − tax saving. Brokerage shows a $10K contribution; your bank account only feels ~$7,800 of it because withholding drops accordingly.

Future value applies standard compound interest to monthly contributions (employee + employer match) at your assumed return for the chosen horizon. We then divide by (1 + inflation)years to give a real (today's-dollars) figure.

Limits enforced: IRS 2025 employee deferral limit of $23,500 ($31,000 if 50+, not yet modeled). Employer match is capped by both the match-percent slider and the match-cap-percent slider, whichever is lower.

What this tool doesn't model (yet): state income tax, FICA (Social Security + Medicare — those are not reduced by 401(k) contribution), AMT for very high earners, the difference between traditional and Roth 401(k), or annual contribution-limit growth in future years. Use it as a directional planning tool, not as your tax return.

Math runs locally. Inputs never leave your browser. Source on github. Tax brackets: IRS Rev. Proc. 2024-40.

Where this framework breaks

• You expect higher tax rates in retirement than now. The whole pre-tax 401(k) thesis is "defer at high rate, pay at low rate". If you're at 12% today and expect to be at 22% in retirement (rare but possible — high pensions, RMDs, dual SS), a Roth contribution may beat traditional. Use the Roth vs Traditional tool for that decision.
• You don't have an emergency fund yet. Locking money in a 401(k) means a 10% penalty (under 59½) if you ever need it back. Funding the 401(k) before a 3-month emergency cushion is a maths-correct, life-wrong move.
• You're maxing the employer match — and stopping there. The match is free money; getting all of it is non-negotiable. But it's not the ceiling. If you can afford more, the tool's compound projection shows the difference 5–10 extra percentage points makes over 30 years.
• Your marginal rate is below 12%. The tax saving from pre-tax 401(k) is small at low brackets — the case for Roth (pay now, never pay later) gets relatively stronger. Around the 12%/22% boundary is where most people should start prioritising traditional.

What to actually do

1. Hit the full employer match. Always. That's a 50–100% instant return — nothing else in finance beats it.
2. Run two scenarios: your current contribution rate, and current +2 percentage points. Look at the gap in monthly paycheck reduction (small) versus the gap in retirement balance (large).
3. If the paycheck hit is bearable, bump it. Then check back in 12 months and consider doing it again.
4. Stress-test at 5% return instead of 7%. If the picture still works at 5%, it's defensible.
5. Recalculate after every raise. Bumping the contribution by the raise % maintains your take-home and accelerates retirement.