What this calculator does
It runs your contributions pay period by pay period, applies your plan’s match formula to each one, and stops matching once you have hit the annual deferral limit and stopped contributing. Then it compares that against what an evenly spread year would have earned, and solves for the contribution rate that captures the full match.
Why this happens at all
Employer match is usually calculated per pay period, on what you contributed in that period. Contribute nothing in December and there is nothing to match in December.
Most people never meet the problem, because most people never reach the annual limit. It bites specifically the diligent saver who front-loads to get money invested sooner, which is otherwise sensible behaviour. That is what makes it worth checking: the people it costs are the ones doing everything else right.
A true-up is the plan-level fix. At the end of the year the plan looks at your total contributions against your total pay, works out the match you should have received, and pays the difference. Many plans do this. Many do not, and the Summary Plan Description is where the answer lives.
What each input means
- Annual salary. Gross pay, which the match percentage is applied to.
- Contribution rate. The percentage of each paycheck you defer.
- Match formula. What your employer pays and up to what share of pay. A common one is 50% of contributions up to 6% of salary.
- Pay periods a year. 26 for fortnightly, 24 for semi-monthly, 12 for monthly. It changes where in the year you hit the limit.
The fix
If your plan has no true-up, set your contribution rate so that you reach the limit in the final pay period rather than before it. That captures every dollar of match and still puts the full $23,500 in. The calculator gives you that rate, and it is usually a smaller change than people expect.
Frequently asked questions
What is a 401(k) true-up?
A year-end correction some plans run to make sure you receive the full employer match you would have earned if your contributions had been spread evenly. Plans that match per paycheck and offer no true-up simply do not pay match for any paycheck in which you did not contribute.
How does maxing out early cost me money?
If you hit the $23,500 deferral limit in, say, September, you contribute nothing in October, November and December. A per-paycheck matching plan pays no match in those months, because match is calculated on what you put in that period. The money is not deferred, it is gone.
How do I know whether my plan has a true-up?
The Summary Plan Description says so, and it is worth checking rather than assuming. Plans that match on annual compensation, rather than per pay period, are unaffected either way. If you cannot tell from the document, the plan administrator can answer it in a sentence.
What contribution rate avoids the problem?
One that spreads your contributions across every pay period of the year, so there is match to earn in each one. The calculator solves for that rate directly rather than leaving it as an instruction.
Is maxing out early ever the right move?
Yes. Getting money invested sooner gives it longer to compound, and if your plan trues up, or matches on annual pay, there is no cost at all. It is also the right call if you expect to leave mid-year, since contributing early gets more in before you go. The point is to know which situation you are in.
Does the catch-up contribution change this?
It raises the limit you are racing towards, so it usually makes the problem easier to avoid rather than worse. The arithmetic is the same: what matters is whether you are still contributing in the final pay periods of the year.
Read more
The full write-up, including what the loss looks like at different salaries, is in 401(k) true-up: are you losing employer match by maxing out early? For what a good match looks like in the first place, what is a good 401(k) match. And for how much of that match is actually yours yet, the vesting calculator.
A planning estimate. Your plan document governs, including whether a true-up applies and exactly how the match is calculated.