New Study Finds 401(k) Participants Hold 29% More in Retirement Savings Than Others

• A 401(k) might be your best bet for saving more for retirement.

• A recent study shows that people with 401(k)s were able to save 29% more for retirement than their peers who did not have the same type of account.

• 401(k) plans are often sponsored by employers, but even if you’re self-employed, you can open one for yourself.

• Traditional plans offer tax-deferred investing, a smart approach to regular contributions, compounding interest, and other tax advantages.

• Your employer might provide a matching contribution up to a certain percent of your salary.

There are many retirement savings vehicles to choose from—401(k)s, IRAs, and more—but a new study suggests you might want to select a 401(k), if it’s available to you.

A 2025 survey conducted by Goldman Sachs Asset Management indicates found that those with a 401(k) plan accumulated 29% more in retirement savings compared to those without access.

A 401(k) retirement plan is sponsored by an employer (which could be you, if you’re self employed). These are tax-advantaged accounts, though the details differ depending on whether you select a traditional or a Roth account.

Some companies are even willing to match the money you contribute to it, up to a percentage of your salary. (The average match is 4.6% and the median match is 4.0%, according to Vanguard.)

According to the report, savers with a 401(k) reported having a higher savings rate relative to income. They also said they felt more prepared for retirement and felt like they were more likely to reach their retirement savings goals, thanks to having a 401(k).

Here’s how a 401(k) can help you reach your retirement goals, as well as a few other things you need to know, including contribution limits and rules for self-employed people.

A traditional 401(k) offers a nice tax perk: you make pretax contributions. and the money in your account is tax-deferred until you make a withdrawal, typically in retirement. That is, you don’t have to pay income tax on what you contribute to the plan until you start withdrawing from it. So your money can grow undiminished by taxes for many years, even decades.

And that’s not all. You can also deduct the amount you contribute from your taxable income. For example, if your weekly pretax paycheck is $1,500 and you contribute 15% of it ($225) to your 401(k), your employer will calculate your tax obligation on $1,275. You don’t have to report that $225 on your tax return. If you stay consistent week after week, that works out to $11,700 ($225 x 52) of your annual income that’s shielded from taxes for years. And the interest your account earns isn’t taxed, either.

You won’t have to pay capital gains tax on your account’s growth over the years, either.

A Roth 401(k), on the other hand, works differently. You don’t get an upfront tax break, but your withdrawals are tax- and penalty-free, as long as you’re older than 59 ½ and have had the account for at least five years.

“Some plans offer a Roth 401(k) option where contributions are made after tax,” says Myles Zueger, a wealth advisor at Adams Wealth Partners. “Withdrawals in retirement can then be completely tax-free if you follow the rules. Many people split contributions between traditional and Roth accounts to keep their tax options open. The choice comes down to this: Do you want to reduce taxes now or later?”

It’s important to remember, though, that if you make withdrawals from your account before you reach the age of 59½, you’ll pay a 10% tax penalty. The Internal Revenue Service (IRS) does allow a few exceptions, including in cases of disability, the birth or adoption of a child, first-time home purchases, and the effects of federally-declared disasters. The list of exceptions is extensive, so be sure to consult the IRS website.

If your employer offers matching contributions, it’s wise to take advantage of them, if you can.

Here’s how that could work. Remember our example above? You earn a weekly paycheck of $1,500 and contribute $225 of that to your traditional 401(k). That $225 is 15% of your paycheck. The median employer match is 4.0%, so let’s say that’s what your employer provides. That would mean your employer would match your contribution (that is, contribute the same amount that you contribute) up to 4% of your salary. So every paycheck, $285 would be contributed to your 401(k): $225 from you, and $60 from your employer.

There can be a bit of a catch here, however. Employer matches are often tied to a vesting schedule. That means you only get to keep the matched amount if you remain employed with the company for a certain period of time (unless you’re participating in a safe harbor or SIMPLE plan). That said, your own contributions are always 100% yours.

The IRS places limits on how much you can contribute to your 401(k) every year. It’s adjusted annually to keep pace with inflation.

If you’re age 49 or younger, you can contribute up to $23,500 to your 401(k) plan in 2025 and $24,500 in 2026. You can contribute an additional $7,500 if you’re age 50 or older, or an extra $11,250 if you’re age 60, 61, 62, or 63. This increases by $500 in 2026.

Matches made by your employer don’t count toward this limit, but they have their own caps. Depending on your age, the total amount contributed to your account in 2025 (that is, your own contributions combined with your employer’s matching contributions) can’t exceed $70,000, $77,500, or $81,250, respectively.

You’ll want to maximize your contributions as much as possible, up to these limits. Fidelity Investments suggests a goal of 15% of your income before taxes, including your employer’s matches, if any.

Zueger recommends working upward from there. “Increase gradually,” he says. “Boost your contributions by 1% each year.”

Say you’re self-employed, or you work for a company that doesn’t offer a 401(k) plan. You have a couple of options. 

If you own a business with no employees, you can set up a one-participant or solo 401(k). The rules are the same for this type of plan as for an employer-sponsored 401(k), but in this case, you’re both the employer and the employee. You can therefore make contributions up to your individual limit and add an employer match, as well.

You could also contribute to an individual retirement account (IRA). You can’t save as much annually to an IRA, however. For 2025, the IRS contribution limit is just $7,000 per year if you’re younger than age 50, increasing by an additional $1,000 if you’re age 50 or over.

IRAs are available in both traditional and Roth versions. You can set one up for yourself or have a financial professional do it for you. Bear in mind that if you have a 401(k) at work, you can also open up a personal IRA. By doing so, and contributing regularly to both, you’ll amplify your total tax-advantaged savings.

The time to begin preparing financially for your retirement years is now, even if they seem to be way out there on a distant horizon. A 401(k) can be a good savings choice.

“A 401(k) isn’t just another line on your paycheck,” Zueger says. “It can be one of the most important parts of your long-term financial independence. Whether through maximizing contributions, using employer matches, or building your own retirement plan as a business owner, consistency and clarity are key.”

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