Workplace retirement plans

A workplace retirement plan is a savings account offered through your employer, often as a 401(k), 403(b) or 457 plan. It makes saving for retirement simple by helping you put money aside automatically.

How does it work?

• Contributions come directly from your paycheck, so saving happens automatically.
• Your money is invested, giving it the opportunity to grow over time.
• Many employers offer matching contributions, adding money to your account and helping you grow your savings even faster.
• You can choose how much to save and often have options for how your money is invested.
• Regular contributions can add up over time, helping you stay on track toward your retirement goals.

What are my retirement plan options?

There are several types of workplace retirement plans, including 401(k), 403(b) and 457 plans. While they work in similar ways, the type of plan available to you typically depends on the organization you work for.

If you’re self-employed or work for a small business, you may have access to alternatives like a SEP IRA or SIMPLE IRA, which are designed to help individuals and small businesses save for retirement. Some employers may also offer a 401(a) plan, where contributions are made by the employer rather than the employee.

In addition to your workplace plan, you can generally save in a Traditional IRA or Roth IRA. Keep in mind that if you’re actively participating in a workplace retirement plan, there may be limits on the amount you can contribute to certain IRAs based on your income and tax filing status.

What are the types of contributions?

Many workplace retirement plans let you choose between Traditional and Roth contributions. Both can help you save for retirement, but the main difference is when you pay taxes. The right option depends on your personal financial situation, goals and expectations for the future.

Traditional Contributions

• Contributions are generally made before taxes are taken out of your paycheck.
• You typically pay taxes when you withdraw money in retirement.

Roth Contributions

• Contributions are made after taxes have been paid.
• Qualified withdrawals in retirement are generally tax-free.

Not sure which option is right for you? Many savers choose the approach that best fits their current and future tax situation, while some plans even allow you to split contributions between both. Watch our video to learn more.

How do I choose investments?

Saving is a great first step, but where you invest your money can also play an important role in helping your savings grow over time.

Most workplace retirement plans offer a variety of investment options, which may include:

• Target date funds that automatically adjust as you get closer to retirement
• Diversified portfolios that spread your investments across different asset types
• Stock and bond funds that offer different levels of growth potential and risk
• Other investment options available through your plan

The investments you choose should reflect your goals, how long you have until retirement, and how comfortable you are with market ups and downs.

How much should I save?

There’s no perfect number that works for everyone, but getting started is often the most important step. Even small contributions can add up over time.

Here are a few ways to build your savings:

• Start with an amount that fits comfortably within your budget.
• Increase your contribution rate when you receive a raise or bonus.
• Consider saving enough to take advantage of any employer match that’s available.
• Review your contribution rate each year and make adjustments as your situation changes.
• Use automatic increase features, if offered by your plan, to gradually boost your savings over time.

Remember, retirement savings is a journey, not a race. Small increases today can make a meaningful difference in helping you reach your future goals.