Workplace retirement plans are a common benefit offered by employers, but plan rules and features can vary. Understanding how these plans work, including plan types, contribution limits, investment options, and distribution rules, can help participants navigate decisions related to saving, investing, and retirement timelines. Key details may depend on plan design, IRS regulations, and individual circumstances, including age, employment status, and income level.
Key Takeaways:
- Workplace retirement plans include options such as 401(k), Roth 401(k), 403(b), 457(b), and profit-sharing plans.
- Contribution limits are set by the IRS and may increase with age-based catch-up provisions.
- Employers may offer matching contributions or other plan-specific features like true-ups or mega backdoor Roth options.
- Some plans include self-directed brokerage windows that expand investment choices.
- Required minimum distributions may be delayed for participants still actively employed.
- Rollover options are available when changing jobs or retiring, subject to plan and IRS rules.
- Investment selection is typically based on available funds within the plan and participant risk tolerance.
- Plan features and tax treatment can differ between traditional and Roth account types.
What are the most common types of workplace retirement plans?
The most common employer-sponsored retirement plans include 401(k), 403(b), 457(b), profit-sharing, and defined benefit plans, along with the federal government’s Thrift Savings Plan. Some plans allow Roth contributions in addition to traditional pre-tax contributions. Small businesses may also offer SEP IRAs or SIMPLE IRAs, while self-employed individuals with no eligible employees other than a spouse may use a Solo 401(k). SARSEPs may still exist, but new SARSEPs have not been permitted since 1996.
How much can I contribute to my 401(k) or 403(b) plan?
The IRS adjusts the amount we can contribute to a defined contribution plan annually. For 2026, an employee can contribute up to $24,500 as elective deferrals. Employees age 50 or older can generally contribute an additional $8,000, for a total of $32,500. Employees who are age 60, 61, 62, or 63 at the end of 2026 may instead make a higher catch-up contribution of $11,250, for a total of $35,750. We recommend contributing at least the amount needed to receive the full employer match and, ideally, increasing your contributions annually. Employer contributions, employee deferrals, and other annual additions are generally limited to the lesser of $72,000 or 100% of compensation for 2026, excluding eligible catch-up contributions. You may continue contributing after reaching RMD age if you are still working. However, whether RMDs are required depends on the type of account and your circumstances. RMDs from a current employer’s plan can generally be delayed until retirement unless you own more than 5% of the business sponsoring the plan.
What is new for 2026?
Beginning in 2026, participants whose prior-year FICA wages from the employer sponsoring the plan exceeded $150,000 must make any catch-up contributions on a Roth basis if the plan permits catch-up contributions. This rule applies only to catch-up contributions, not regular elective deferrals. SECURE 2.0 also continues to allow the higher $11,250 catch-up contribution for employees who are age 60, 61, 62, or 63 at the end of the year. Employees age 50 through 59, or age 64 and older, may generally contribute the standard $8,000 catch-up amount in 2026.
2026 Catch-up Contributions | |||||
| Age | Catch-up Amount | ||||
| 50-59 | $8,000 | ||||
| 60-63 | $11,250 | ||||
| 64+ | $8,000 | ||||
How can I maximize the benefits my workplace retirement plan provides?
There are a number of optional plan provisions that employers could choose to implement that enhance the overall benefit for employees. Check to see if your plan allows for any of the following to make sure you are getting the most out of what your plan offers.
- Matching True-Up – A match is a percentage of what you contribute that your employer contributes on your behalf up to a certain limit set by the plan. Your employer matches a set percentage of your contributions to the plan each pay period. If you decide to contribute the annual maximum to your plan early in the year, then you will not contribute to the plan for the rest of the pay periods throughout the year, and therefore would not receive a match. However, a true-up is an optional plan provision that a plan could adopt that after the end of the calendar year, the plan administrator would calculate if you contributed enough to get the maximum match and your employer would then contribute the missed match. The benefit of this provision is even earners who “front-load” or contribute the annual maximum to their employer before the end of the year can still receive the full match from the employer. Since calculations cannot be completed until after the end of the year, the true-up contribution may not be made until months later into the next year.
- Mega Backdoor Roth – If permitted by the plan, employees may make after-tax contributions beyond the annual elective deferral limit. For 2026, after reaching the $24,500 elective deferral limit, an employee may be able to continue making after-tax contributions up to the $72,000 annual additions limit after accounting for employer contributions and forfeitures. The after-tax contributions may then be converted to a Roth account within the plan or rolled to a Roth IRA if the plan permits. This strategy, commonly known as a mega backdoor Roth, can build Roth assets beyond the $7,500 annual Roth IRA contribution limit and is not subject to the Roth IRA income limits in the same way as a direct Roth IRA contribution. The annual additions limit includes pre-tax and Roth elective deferrals, after-tax employee contributions, employer matching and profit-sharing contributions, and forfeitures. Catch-up contributions and rollovers are not included. Because employer contributions may not be known until later, participants should monitor contributions carefully to avoid exceeding the limit.
- In-plan Self-Directed Brokerage Account – This optional provision allows employees to create a brokerage account linked to their 401(k) plan, that allows the employee to have a much larger pool of investment options. Rather than being limited to the funds that are available within the plan, employees that invest through the brokerage account typically can invest in most mutual funds, ETFs, stock, and bonds. The plan sponsor may limit or exclude certain asset types which may have reduced liquidity or have too much perceived risk.
How should my 401(k) be invested?
Most employer plans have a set list of investment options. Selecting the right fund or combination of funds depends on your tolerance for market fluctuations and your time horizon for withdrawing from the account. Depending on the available options, a target date fund may be appropriate, or it may make sense to select several funds to create a diversified allocation. The important thing is to make an intentional selection that aligns with your goals. Stable value funds are designed to preserve capital and may be appropriate for short-term needs or investors seeking lower volatility. However, investors with longer time horizons may benefit from the greater growth potential of a diversified portfolio that includes stocks and bonds.
How can Beacon Pointe help?
Beacon Pointe advisors can link to and manage most employer-sponsored retirement plans, allowing these assets to be managed as part of the client’s overall portfolio rather than as a standalone account. This allows the advisor to coordinate the allocation across all investment accounts, select from the investments available within the plan, monitor and rebalance the account, and make adjustments as the client’s goals or circumstances change. Managing workplace retirement assets alongside the rest of the portfolio can improve diversification, reduce unintended overlap or concentration, and keep more of the client’s wealth aligned with their overall investment strategy. Speak with your Beacon Pointe advisor if you are interested in learning more about managing your employer-sponsored retirement plan as part of your overall investment strategy.
Some workplace retirement plans allow employees to take an in-service distribution while they are still employed. For 401(k) plans, this option is most commonly available after age 59½, although the plan is not required to offer it and may apply different rules to employer contributions or rollover assets. Eligible distributions can generally be transferred directly to an IRA without current income tax, providing access to additional investment options and allowing the assets to be managed alongside the employee’s other accounts. However, a rollover is not always the best option. Participants should compare investment options and fees, plan loan availability, creditor protections, withdrawal rules, and any employer stock before making a decision. Speak with your Beacon Pointe advisor to determine whether your plan permits an in-service distribution and whether a rollover would be appropriate.
For business-owner and plan sponsor clients, Beacon Pointe can also serve as a 3(21) or 3(38) investment fiduciary. Under a 3(21) arrangement, Beacon Pointe provides investment advice while the plan sponsor retains final decision-making authority. Under a 3(38) arrangement, Beacon Pointe assumes discretion and fiduciary responsibility for selecting, monitoring, and replacing plan investments, although the plan sponsor remains responsible for prudently selecting and monitoring the investment manager. Through RPAG, clients can also access Fiduciary Briefcase, a cloud-based plan governance and documentation system, and institutional investment structures such as Collective Investment Trusts that may reduce investment costs when appropriate. Beacon Pointe also offers TIFIN @Work, which provides employees with personalized financial guidance and benefits support while helping reduce routine workload for HR teams, at no additional cost to the employer.
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