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.

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.

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 2024, you can invest up to $23,000. 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 $30,500 for 2024.

Your money is not taxed until it's withdrawn: You can start using the money in your 401(k) after age 59½.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.

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.