The major types of 401(k) plans are traditional 401(k)s and Roth 401(k)s. Smaller employers may offer you a SIMPLE (Savings Incentive 🌸Ma💃tch Plan for Employees) 401(k) or a 澳洲幸运5开奖号码历史查询:safe harbor 401(k) plan. If you're an entrepreneur, you may be able to set up 澳洲幸运5开奖号码历史查询:your own 401(k) account, too. These types of 401(k) plans have grown in popularity since the introduction of the 澳洲幸运5开奖号码历史查询:401(k) plan in the late 1970s and early ’80s. Nowadays, about 70 million workers participate in this type of retirement savings account. L⛎earn more about these types of plans♔ to decide which is right for you.

5 Types of 401(k)s and How They Work

All 401(k)s are 澳洲幸运5开奖号码历史查询:defined contribution plans. They're funded by 🐻employee contributi𒀰ons. Sometimes employers contribute, too.

With a 401(k), the amount of money that employees will have available for retirement is determined by how much they contributed to the plan and how well the investments in their account have performed over the years.

There are several different types of 401(k) p⭕lans. These are the ones you are most likely to encounter as either an employee or an🔴 employer. 

Traditional 401(k)

This is what most people probably think of as a 401(k). The employee 澳洲幸运5开奖号码历史查询:contributes pre-tax money to their account each pay period, usually through regular payroll deductions. That 澳洲幸运5开奖号码历史查询:money goes into the investments, typically 澳洲幸运5开奖号码历史查询:mutual funds, that they’ve chosen from the plan’s offerings.

The maximum that employees can contribute is set by law. For 2025, it is $23,500 a year for anyone under age 50 or $31,000 for those 50 or older—unless you're 60, 61, 62, or 63. In that case, you can contribute up to $34,750.

On top of that, many employers will make a 澳洲幸运5开奖号码历史查询:matching contribution, such as 50 cents per dollar of the employee’s contributions, up to 6% of the employee's salary.

With a traditional 401(k), the money that the employee contributes is not immediately taxed. Instead, the amount of their contribution lowers their taxable income for the year. So, for example, an employee who makes $50,000 a year and contributes $10,000 to their 401(k) plan will pay income taxes only on $40,000 of their income that year. The account’s earnings will also grow 澳洲幸运5开奖号码历史查询:tax-deferred until they’re eventually withdrawn.

When the employee makes withdrawals (often referred to as distributions) from the account, that money will be taxed as regular income. In addition, because 401(k)s are intended for retirement, employees generally can’t withdraw money before age 59½ without paying a 10% 澳洲幸运5开奖号码历史查询:early withdrawal penalty. There are, however, 澳洲幸运5开奖号码历史查询:some exceptions to that rule.

Traditional 401(k) plans are also subject to 澳洲幸运5开奖号码历史查询:required minimum distribution (RMD) rules. Account owners must take RMDs each year starting at age 73. (Your birth year may mean that your RMDs started earlier. 澳洲幸运5开奖号码历史查询:Internal Revenue Service (IRS) 澳洲幸运5开奖号码历史查询:Publication 590-B has tables and worksheets that you can use to calculate your RMDs.) 

Roth 401(k)

The 澳洲幸运5开奖号码历史查询:Roth 401(k), sometimes called a 澳洲幸运5开奖号码历史查询:designated Roth account, is like a traditional 401(k) but with one key difference: Contributions don’t receive an upfront tax break, but withdrawals will be tax free if the employee meets 澳洲幸运5开奖号码历史查询:certain requirements. Specifically, they must generally be 59½ or older and have had the Roth account 澳洲幸运5开奖号码历史查询:for at least five years; however, as with traditional 401(k)s, there are exceptions. Contributions to a Roth 401(k)—as opposed to the account’s earnings—can be withdrawn tax free at any time because they have already been taxed.

Some employers offer both traditional and Roth 401(k) options. Employees can, if they wish, split their contributions between the two types, but their maximum total contribution (in 2025) can’t exceed $23,500 a year for anyone under age 50 or $31,000 for those 50 or older—unless you're age 60, 61, 62 or 63. In that case, you can contribute up to $34,750.

Roth 401(k)s were subject to the same RMD rules as traditional 401(k)s before 2024. Now, RMDs are no longer required from designated Roth 401(k)s during the account owner’s lifetime, per the 澳洲幸运5开奖号码历史查询:SECURE 2.0 Act of 2022.

SIMPLE 401(k)

SIMPLE (Savings Incentive Match Plan for Employees) 401(ℱk) plans are designed for businesses with 100 or fewer employees.

With a SIMPLE 401(k) plan, employees can contribute up to $16,500 (in 2025) if they’re under age 50 or $20,000 if they’re 50 or older. The exception is if you're age 60, 61, 62 or 63. In that case, you can contribute up to $21,750. As with a traditional 401(k), that money isn’t taxed as income until it’s eventually withdrawn from the plan.

The employer must make either a matching contribution of up to 3% of each employee’s pay for those who contribute to the plan or a 澳洲幸运5开奖号码历史查询:nonelective contribution of 2% for all eligible employees, regardless of whether they participate in the plan.

Like traditional and Roth 401(k)s, SIMPLE 401(k)s can be subject to early withdrawal penalties before age 59½ and to required minimum distributions after age 73.

Safe Harbor 401(k)

澳洲幸运5开奖号码历史查询:Safe harbor is a legal term for a provision in the law that exempts a person or company from certain regulations if they meet other requirements. A 澳洲幸运5开奖号码历史查询:safe harbor 401(k) allows employers to skip the 澳洲幸运5开奖号码历史查询:nondiscrimination tests that most 401(k) plans are subject to. Nondiscrimination tests are intended to ensure that plans do not discriminate in favor of 澳洲幸运5开奖号码历史查询:highly-compensated employees in terms of employer matches or other benefits. Because safe harbor 401(k)s are easier to administer, they are especially popular with small businesses.

In return, employers with safe harbor 401(k)s must make annual contributions to every eligible employee’s plan, regardless of whether the employees themselves contribute. In addition, that money is immediately vested, regardless of how long the employee has been with the
company.

(Other types of 401(k) plans often have 澳洲幸运5开奖号码历史查询:vesting requirements for their employer contributions, while employee contributions are always immediately vested.)

Employers can makeℱ their required co🦋ntributions in one of three ways:

1. Nonelective contribution: The employer contributes an amount equal to 3% of compensation on behalf of each non-highly compensated employee. Employees are not required to contribute.
2. Basic match: The employer matches 100% of each non-highly compensated employee’s elective contributions, up to 3% of their compensation. Also, it matches 50% of the next 2% in compensation. So, for example, an employee who earns $50,000 a year would be eligible for a maximum match of $2,000 (100% of their first $1,500 in contributions plus 50% of the next $1,000).
3. Enhanced match: The employer can base its match on up to 6% of the employee’s compensation, rather than just 5%, as with a basic match.

Aside from those differences, safe harbor 401(k)s work much like any other 401(k) and are subject to 澳洲幸运5开奖号码历史查询:the same rules ꦺon contributions, early withdrawals, and required minimum distributions.  

One-Participant 401(k) 

These plans go by a variety of names, including solo 401(k), individual 401(k), and 澳洲幸运5开奖号码历史查询:self-employed 401(k). They are designed for businesses with no employees other than the owner, plus their spouse if that person also works in the business.

Because the owner is considered both an employer and an employee of the business, they can contribute to the plan in both capacities.

As employees, they can contribute up to 100% of their compensation or net income from self-employment, with the same as traditional and Roth 401(k) plans: for 2025, it's $23,500 a year for anyone under age 50 or $31,000 for those 50 or older. There's an exception if you're 60, 61, 62 or 63. If you are, you can contribute up to $34,750.

As their own employers, they can also make additional, nonelective contributions. The maximum depends on how their business is set up for tax purposes (澳洲幸运5开奖号码历史查询:S corporation vs. 澳洲幸运5开奖号码历史查询:self-employed sole proprietor, for example).

In total, as employer and employee, the business owner can contribute as much as $70,000 to their 401(k) plan (for 2025), plus another $7,500 if they’re 50 or older (or $11,250 if they're 60, 61, 62 or 63).

Spouses who earn income from the business can also contribute to a one-participant 401(k), up to the same maximums, and they are eligible for the same additional employer contribution.

One-participant 401(k)s can be either tradition♊al or Rot꧅h plans and are subject to the same rules as those plans for early withdrawals and required minimum distributions.

Other Retirement Savings Vehicles

There are also other ways you can save for retirement. ౠ澳洲幸运5开奖号码历史查询:Individual retirement accounts (IRAs) offer🉐 a traditional option and a Roth option. You can open an IRA on your own with a broker and potentially get a tax deduction for contributing every year.

Additionally, your employer may offer a 澳洲幸运5开奖号码历史查询:health savings account (HSA). An HSA is a place where you can save pre-tax money every month and use it for medical expenses. It's often paired with a high-deductible health plan. It's a 澳洲幸运5开奖号码历史查询:tax-advantaged account that can be used as a retirement savings account. That's because you can 澳洲幸运5开奖号码历史查询:invest the funds in an HSA similar to how you would with a 401(k) or IRAဣ. You can also leave the funds where they are and roll them over year to year if you don't use them. And when you reach age 65, you can use the money in your HSA for other expenses, not just qualified medical expenses. (If you do so, however, you’ll pay income tax on those expenses.)

The Bottom Line

There are several types of 401(k) plans that employers may offer their workers. Traditional and Roth plans are most common among larger employers, while SIMPLE and safe harbor plans are often found at sm🐻all businesses. Business🥂 owners without other employees can also open one-participant 401(k) plans. If you have any questions about your plan, reach out to your employer or plan administrator.