401(k) plans

Many employers offer a 401(k) plan as part of a benefits package and getting set up is easy. When you start a new job (or during open enrollment), you sign up and choose how you want your money to be invested. Your employer takes out whatever percentage or dollar amount you want from your paycheck and will put it into your account. Many employers will even put money into your plan on your behalf, either through matching or profit-sharing contributions. And no matter how much your money grows, it will grow tax free. Once you reach retirement age, you can start withdrawing your money to use however you want. Currently, there are no maximum income limits on who can contribute to a 401(k), however, there are limits on how much can be contributed. Want to learn more about how a 401(k) works? This article can help.

Typically, a 401(k) is an employer-sponsored retirement savings plan set up for its employees. However, if you are self-employed, a business owner, or don't have access to a 401(k) through your employer, you could consider other retirement savings options like a Solo 401(k), a Simplified Employee Pension (SEP) IRA, or an Individual Retirement Account (IRA). Each of these retirement accounts can be opened and managed by individuals.

Want to know more? Read our guide on retirement plans for the self-employed.

A traditional 401(k) will most likely be one of your main sources of income in retirement, so it's important to try and max out your contributions. For [2025], you can invest up to $[23,500]. Not only will this increase your nest egg, but your contributions will also lower your current taxable income since they are taken from your paycheck before taxes. You can also take advantage of catch-up contributions if you're 50 years old and up. You can put in an additional $[7,500] for a maximum annual contribution of $[31,000] for [2025]. And if you're aged 60, 61, 62, 63 you can contribute up to $[35,250] because of a higher catch-contribution limit of $[11,250].

If you're like most people, a traditional 401(k) will be one of your main sources of income in retirement, so it's important to do what you can to help maximize contributions, and growth. Here are a few tips and considerations.

Try to max out your 401(k) contributions: For [2025], you can invest up to $[23,500]. Not only will this increase your nest egg, but your contributions will also lower your current taxable income since they are taken from your paycheck before taxes.

Get your full employer match: If you're not able to swing the maximum contribution amount, put in at least enough to get the match offered by your employer—it's essentially free money after all.

Take advantage of catch-up contributions: For those 50 years old and up, you can put in an additional $[7,500] for a maximum annual contribution of $[31,000] for [2025].

Your money is not taxed until it's withdrawn: You can start using the money in your 401(k) after age 59½. With a Roth 401(k), contributions are made with after-tax dollars so any amount you withdraw later will generally not be taxed.

Make future contribution increases automatic: Many employer-sponsored 401(k) plans offer an escalation option that gradually increases your contribution amount over time.

Carefully select how contributions are invested: Your 401(k) plan will most likely offer multiple investment options, so it's important to understand the fees, your risk tolerance, experience, other investment holdings, and retirement time horizon to maximize your plan.

Want to find out more about getting the most out of your 401(k)? Connect with an advisor.

Simple, really. Employer matching is when your employer contributes to your retirement account based on your own contributions. Typically, they'll match a percentage of your contribution up to a certain limit. For example, 50% of contributions up to 6% of what you contribute. It's common for matches to have a vesting schedule, meaning you must stay with the company for a certain period to get full ownership of the matched funds. This "free money" can significantly boost your retirement savings. To maximize your benefits, try to contribute at least enough to get the full match. Want to know more about maximizing your contributions? Check out our article.

When you leave your job, you'll need to figure out what to do with the money that you've been contributing to your company's retirement plan. There are several options to consider. One could be to roll over your funds into an IRA or your new employer's 401(k) plan. In the case of a traditional 401(k), this will let you move your funds while maintaining the tax-deferred status. To help you determine which option is right for you and your retirement goals, talk to one of our financial advisors.

Yes, you can borrow against your 401(k), if your plan allows it. You can borrow up to 50% of your vested account balance, with a maximum of $50,000. The loan will usually need to be repaid within five years (longer if used for a home purchase). With any loan, there can be risks. For example, if you leave your job, the loan may need to be repaid quickly. And failing to repay it can result in taxes and penalties. While borrowing against your 401(k) can provide immediate funds, it can impact the growth of your retirement savings. Looking for more guidance? Connect with one of our financial advisors. They'll ask deeper questions to better understand if a loan is right for your situation.

You can start using the money in your 401(k) after age 59 ½. Withdrawals made before then could incur a 10 percent early withdrawal penalty, along with ordinary income tax on the distribution. However, there are exceptions, like if you leave your job at age 55 or older (known as the Rule of 55), or if you qualify for a hardship withdrawal under specific IRS guidelines. If you don't tap your money by the time you reach age 72, you'll be forced to take Required Minimum Distributions (RMDs) by April 1 of the following the year. Want to know more? Read more about the ins and outs of withdrawing money from your 401(k).

According to the 2023 Northwestern Mutual Planning & Progress Study, Americans believe they'll need $1.27M to retire comfortably. How much you need depends entirely on what you want to do after you stop working and what that might cost. Once you have a sense of what you might need, you can build a plan for how you'll generate lasting income and account for common risks that can threaten the enjoyment of your retirement. Our guide can show you want to look for and consider. You can also connect with one of our advisors. They'll ask deeper questions, and listen closely, to better understand your retirement goals and priorities. Their expertise will help uncover your blind spots and opportunities that others might miss.