Overview
- Goldman Sachs Asset Management’s 2025 survey found people with a 401(k) accumulated about 29% more for retirement than peers without access, reporting higher savings rates and greater confidence.
- Traditional 401(k) contributions are pretax with tax-deferred growth, while Roth 401(k) withdrawals can be tax-free after age 59½ and five years of participation; early withdrawals generally trigger a 10% penalty except for specific IRS-approved situations.
- Employer matches remain a key driver, with Vanguard data citing a 4.6% average and 4.0% median match, though many plans require staying through a vesting schedule to keep matched dollars.
- The IRS employee contribution limit is $23,500 for 2025 and $24,500 for 2026, with a $7,500 catch-up at age 50+ and an extra $11,250 at ages 60–63; for 2025, combined employee–employer contributions are capped at up to $70,000, $77,500, or $81,250 depending on age.
- Workers without a workplace plan can use a solo 401(k) or an IRA (2025 IRA limit $7,000 if under 50), while Roth IRAs avoid RMDs but carry 2026 income bars at $168,000 MAGI for single filers and $252,000 for joint filers, with conversions taxed in the year executed.