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Module 11 of 11 12 min

Retirement Basics

401(k)s, employer matches, and IRAs — and why starting early matters.

Course lessons

Step 1

The lesson

Retirement might feel impossibly far away — which is exactly why it's the goal that benefits most from starting early.

  • 401(k) / 403(b): retirement plans offered by employers. Contributions come straight out of your paycheck.
  • IRA (Individual Retirement Account): one you open yourself at a brokerage, as long as you have earned income.

Key term

Employer match

Money your employer adds when you contribute — for example, 100% of what you put in, up to 4% of your pay. Not contributing enough to get the full match leaves free money on the table.

  • Traditional accounts: usually a tax break now; you pay income tax when you withdraw in retirement.
  • Roth accounts: you pay tax now; qualified withdrawals in retirement are tax-free. Many young people with lower incomes favor Roth accounts, since their tax rate now may be lower than later.

The IRS sets yearly limits on how much you can contribute; check irs.gov for current amounts. Vesting rules may require you to work somewhere for a while before employer match money is fully yours.

Step 2

See it

$200 a month until 67, at a hypothetical 7%Hypothetical example

Starting at 22: about $758,519 from $108,000 contributed. Starting at 32: about $360,211 from $84,000 contributed.

Step 3

Real-world example

The free money

Ray earns $40,000 a year. His employer matches 100% of his 401(k) contributions, up to 4% of his pay.

  • If Ray contributes 4% ($1,600 a year), his employer adds another $1,600.
  • That's an instant 100% return on those dollars, before any investment growth.
  • If he contributes nothing, he gives up $1,600 a year in pay he could have had.

Step 4

Try it: start at 22 vs. 32

$200 a month for 45 years, then for 35 years. Returns are hypothetical and steady.

Your numbers

Real returns vary year to year and can be negative.

Results

Hypothetical balance after 45 years

$758,519

Compounded monthly at a constant 7% a year

You contributed

$108,000

Hypothetical growth

$650,519

Growth share

86%

of the final balance

Hypothetical balance by year. After 45 years the balance is $758,519, made of $108,000 in contributions and $650,519 in hypothetical growth. Use the arrow keys to step through years, or open the table below.
Show year-by-year table
Hypothetical balance by year
YearContributedGrowthBalance
1$2,400$79$2,479
2$4,800$336$5,136
3$7,200$786$7,986
4$9,600$1,442$11,042
5$12,000$2,319$14,319
6$14,400$3,432$17,832
7$16,800$4,800$21,600
8$19,200$6,440$25,640
9$21,600$8,372$29,972
10$24,000$10,617$34,617
11$26,400$13,198$39,598
12$28,800$16,139$44,939
13$31,200$19,466$50,666
14$33,600$23,207$56,807
15$36,000$27,392$63,392
16$38,400$32,054$70,454
17$40,800$37,225$78,025
18$43,200$42,944$86,144
19$45,600$49,250$94,850
20$48,000$56,185$104,185
21$50,400$63,795$114,195
22$52,800$72,129$124,929
23$55,200$81,239$136,439
24$57,600$91,180$148,780
25$60,000$102,014$162,014
26$62,400$113,805$176,205
27$64,800$126,621$191,421
28$67,200$140,538$207,738
29$69,600$155,634$225,234
30$72,000$171,994$243,994
31$74,400$189,711$264,111
32$76,800$208,882$285,682
33$79,200$229,613$308,813
34$81,600$252,015$333,615
35$84,000$276,211$360,211
36$86,400$302,329$388,729
37$88,800$330,509$419,309
38$91,200$360,899$452,099
39$93,600$393,660$487,260
40$96,000$428,963$524,963
41$98,400$466,991$565,391
42$100,800$507,941$608,741
43$103,200$552,026$655,226
44$105,600$599,471$705,071
45$108,000$650,519$758,519

Educational calculator, not financial advice. Results are hypothetical estimates based on the numbers you enter.

Step 5

Knowledge check

Answer each question, then check your answer to see the explanation. Retake it as many times as you like.

Question 1 of 3

ScenarioYour employer matches 100% of contributions up to 5% of your pay. You earn $50,000.How much should you contribute to get the full match?

Choose an answer.

Step 6

Summary

Employer plans like 401(k)s and individual IRAs help you save for retirement with tax benefits. Always get the full employer match. Traditional accounts give a tax break now; Roth accounts give tax-free qualified withdrawals later. Contribution limits change yearly, and cashing out early is costly. Starting early matters most.

Step 7

What you should remember

  • Get the full employer match — it's free money.
  • Traditional = tax break now. Roth = tax-free later.
  • Check irs.gov for yearly limits.
  • Don't cash out when you change jobs — roll over.
  • Start early; time does the heavy lifting.

Finished the lesson?

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