401K Calculator Guide · Growth
How 401K Growth Is Calculated
The projection runs month by month using an equivalent monthly return, end-of-month contributions, and a salary assumption that changes once per modeled year.
Equivalent monthly return
monthly return = (1 + annual return)^(1/12) − 1
The app does not divide the annual return by 12. The equivalent monthly rate compounds back to the annual assumption over twelve months.
Each modeled month
next balance = current balance × (1 + monthly return) + monthly employee contribution + monthly employer contribution
Growth is applied to the opening balance first. Contributions are then added at the end of the month.
Salary growth
Salary stays constant within each modeled year. At the start of the next modeled year, salary is multiplied by 1 + annual salary growth. That new salary sets employee and employer contribution amounts for the year.
Investment-growth component
The result reports estimated investment growth as ending balance minus starting balance, modeled employee contributions, and modeled employer contributions. Under a negative-return assumption, this component can be negative.
Built-in example
With a $50,000 starting balance, $80,000 salary, 8% employee contribution, 50% employer match through 6% of salary, 7% annual return, 2% salary growth, and 30 years, the frozen model produces an ending balance of about $1.434 million.