For many people, a workplace retirement plan — whether a 401(k), 403(b) or governmental 457(b) — is one of the most important tools for preparing for the future. Whether you’re making your first contribution, maximizing your savings or getting ready to turn those savings into retirement income, understanding a few key rules can help you make more informed decisions.
What Is a Workplace Retirement Plan?
Workplace retirement plans generally allow you to contribute a portion of your paycheck toward retirement through automatic payroll deductions. The type of plan available to you often depends on your employer:
- 401(k): Common among private-sector employers
- 403(b): Often offered by public schools and certain tax-exempt organizations
- Governmental 457(b): Generally available to employees of state and local governments
For 2026, key contribution limits include:1
- $24,500: Employee contribution limit for 401(k), 403(b) and governmental 457(b) plans
- $8,000: Additional catch-up contribution that may be available if you’re age 50 or older
- $11,250: Higher 2026 catch-up limit for participants ages 60 through 63
There are important exceptions and plan-specific rules. For example, some 403(b) participants with at least 15 years of service may qualify for an additional catch-up provision.2 Reviewing your plan documents can help you understand the rules that apply to you.
Traditional or Roth Retirement Contributions: What's the Difference?
Depending on your workplace plan, you may have the option to make Traditional contributions, Roth contributions or a combination of both. The biggest difference comes down to when you pay taxes:
- Traditional: Contributions are generally made on a pre-tax basis, reducing your taxable income today. When you withdraw that money in retirement, distributions are generally subject to income tax.
- Roth: Contributions are made with money you've already paid taxes on. Qualified withdrawals in retirement can then be made tax-free, provided IRS requirements are met.
Your income, tax situation, retirement timeline and overall financial plan can all play a role in determining which approach makes the most sense.
How Employer Retirement Plan Contributions Work
If your employer contributes to your retirement plan, understand how those contributions work. Some employers match a portion of what you contribute, while others use a different formula. Also check your plan’s vesting schedule. The money you personally contribute is yours, but some employer contributions may require a period of service before you have full ownership.
What Happens to Your 401(k), 403(b) or 457(b) When You Leave a Job?
For much of your career, retirement planning focuses on accumulation. As retirement approaches, the question shifts from "How much can I save?" to "How do I actually use this money?"
When you retire or leave an employer, you may have several options for your workplace retirement savings, depending on the type of plan and its rules. You may be able to:
- Leave your assets in your former employer’s plan
- Roll eligible assets into another employer-sponsored retirement plan
- Roll eligible assets into an IRA
- Take distributions from the account
Each choice can have different implications related to investments, fees, taxes and access to your money. Many eligible distributions can be rolled directly into another eligible retirement plan or IRA without current taxation. If an eligible taxable rollover distribution is instead paid directly to you, it is generally subject to 20% federal income tax withholding, even if you intend to roll it over later.3
That's why it's important to understand your options before making a decision.
How to Turn Retirement Savings Into Retirement Income
Once you retire, the accounts you spent years building may become an important source of income alongside Social Security, pensions, personal savings or other investments.
Deciding how much to withdraw isn't always simple: taking too much too quickly could increase the risk of depleting your savings, while withdrawing too little could unnecessarily limit your lifestyle.
Your withdrawal strategy may need to consider several factors, including:
- Your expected expenses in retirement
- Other sources of retirement income
- Your age and anticipated retirement timeline
- Market conditions and investment strategy
- Inflation
- Taxes
- How long you need your savings to last
A sustainable retirement income strategy looks at your entire financial picture rather than choosing a percentage in isolation.
Retirement Withdrawals, Taxes and Required Minimum Distributions
Taxes don't disappear when you retire.
As you plan withdrawals, keep a few tax considerations in mind:
- Pre-tax savings: Distributions attributable to pre-tax contributions and earnings are generally included in taxable income.
- Roth savings: Qualified distributions from designated Roth accounts can generally be withdrawn tax-free.
- Required withdrawals: Certain retirement accounts are subject to required minimum distribution rules.
Under current IRS rules, required minimum distributions, or RMDs, generally begin at age 73 for applicable retirement accounts, including 401(k), 403(b) and 457(b) plans. Designated Roth accounts are not subject to RMDs while the account owner is alive.4
Your Retirement Plan Is Part of a Bigger Picture
Retirement planning doesn’t begin when you’re ready to retire. The decisions you make throughout your career — how much you contribute, whether you take advantage of catch-up contributions, how your money is invested and how you eventually withdraw it — can all shape your financial future.
Your workplace plan is also only one part of your overall retirement picture. Social Security, pensions, IRAs, personal savings and other investments may all play a role. A CommunityAmerica Wealth Management Wealth Advisor can help you build a strategy designed to support both your future goals and your financial well-being throughout retirement. Schedule a complimentary conversation about your financial goals today.
