Maximizing Your Employer-Sponsored Retirement Plan: How to Optimize Tax Advantages, Matches, and Investment Growth

Landing a new job or reaching eligibility for your company’s retirement plan is a milestone worth celebrating. But once you’re in, the bigger question emerges: How do you make the most of this benefit to build long-term wealth and secure your financial future? 

At Plancorp, we regularly help employees, executives, and business owners navigate the complexities of retirement plan options. 

Whether you have access to a 401(k) plan, 403(b) plans, 457 plans, or even more specialized structures like cash balance plans or defined benefit plans, the principles remain the same: understand your benefits, maximize employer contributions, and create a savings strategy that aligns with your vision for retirement. 

Here are the key steps every eligible employee, especially high-earners, should take when evaluating an employer-sponsored retirement plan. 

1. Don’t Be Afraid to Ask Questions

When you start a new role, one of the first conversations you should have with HR or your plan administrator is about the company’s retirement plan options. Each plan design is different, and clarity up front can help you avoid costly mistakes. 

Key questions to ask: 

When am I eligible to enroll? Most plans have rules about when new hires can participate. For example, some require six months of service before enrollment, while others allow immediate eligibility.

What types of retirement plans are offered? Larger organizations often sponsor a 401(k) plan, while schools and nonprofits may provide 403(b) plans. Some small businesses or self-employed individuals use SEP IRAs or SIMPLE IRA plans. 

Are there employer contributions? Understanding the employer match or non-elective contributions is critical. Will your employer deposit money every payroll cycle, quarterly, or annually? How do my own contributions affect what my employer will contribute? (More on that last question below.) 

What are the investment options? Every plan includes a range of mutual funds, index funds, and other vehicles. Evaluating performance, fees, and investment risks is key to long-term success.

Remember, once you’re eligible, your contributions will be made through payroll deductions and invested directly into your account. This seamless setup makes it easier to build wealth consistently over time.

2. Don’t Leave Money on the Table

One of the biggest mistakes participants make is failing to capture the full matching contributions available in their retirement accounts. This is essentially “free money” toward your retirement savings. 

Here’s an example: 

If your employer offers a 100% match on the first 3% of salary and 50% on the next 2%, contributing 5% of your salary unlocks the full 4% employer contribution. Skipping this means you’re leaving compensation—and future growth—on the table. 

Some employers use a Safe Harbor design, where they must contribute at least 3% of salary to each eligible employee, regardless of whether you contribute. Others may offer profit-sharing contributions or hybrid arrangements like cash balance plans. 

The key takeaway: always contribute at least enough to receive the full match. Over a 30-year career, even modest matching contributions can add six figures or more to your retirement income. 

 3. Save Some, Then Save Some More

The IRS sets annual contribution limits for defined contribution plans like 401(k)s. For 2025: 

• Employees can contribute up to $23,000 to a 401(k) plan, 403(b) plans, or 457 plans. 

• If you’re age 50 or older, you can make an additional $7,500 catch-up contribution. 

• If you’re in the sweet spot of ages 60-63, you can take advantage of the new super-catch-up contributions, which can add $11,250 more. 

That may sound like a lot, but high-net-worth individuals often need to save aggressively to replace 70–90% of their income in retirement. Depending on your lifestyle, that may mean saving 15–20% of income each year across different retirement accounts. 

And don’t overlook tax diversification:

• Traditional 401(k): Contributions are tax-deductible and grow tax-deferred, reducing your taxable income today. Withdrawals in retirement are taxed as ordinary income. 

• Roth 401(k) and Roth IRA: Contributions are made with after-tax dollars, but future withdrawals are tax-free. 

• Simplified Employee Pension Plans (SEP) IRA, and SIMPLE IRA: Attractive options for small business owners and self-employed individuals seeking higher contribution limits and tax advantages. 

The right mix of accounts depends on your tax bracket, projected retirement income, and estate planning goals. A fiduciary wealth manager can help you determine the right setup for future growth and tax optimization. 

4. Understand the Lingo (and the Risks)

Retirement plans come with their own language. Here are a few key terms you may come across when evaluating your options:  

Annual Contribution Limit: The maximum amount you can contribute each year to your retirement accounts.  

Cash Balance Plan: A type of defined benefit plan that looks like a defined contribution plan, often used by small businesses and professional firms.  

Defined Benefit Plan: A traditional pension plan promising a specific retirement benefit based on salary and service.  

Defined Contribution Plan: Retirement accounts like 401(k)s, where the benefit depends on contributions and investment performance.  

Distributions: Withdrawals from your retirement plan, generally after age 59½ to avoid IRS penalties.  

Employer Match: Contributions your employer makes to your account to match your savings, often dollar-for-dollar or 50% up to a set percentage of pay. 

Payroll Deduction: Automatic contribution from your paycheck into your retirement plan.  

Roth 401(k) / Roth IRA: Contributions are made with after-tax dollars, but qualified withdrawals are tax-free.

SEP IRA / SIMPLE IRA: Retirement plans designed for self-employed individuals or small businesses, offering higher contribution limits than traditional IRAs.  

Tax-Deferred: Growth on contributions and investment earnings that are not taxed until withdrawal.  

Tax-Deductible Contribution: Contributions that reduce your taxable income in the year made. 

High-net-worth individuals often face more complex questions, such as integrating retirement plan benefits with social security, taxable brokerage accounts, and estate planning strategies. That’s why working with a trusted financial advisor can make a meaningful difference. 

5. Stay Focused on the Big Picture

Ultimately, your employer-sponsored retirement plan is just one piece of a much larger puzzle, particularly at high levels of wealth. True wealth management means coordinating your retirement savings with other elements of your financial life:

• Tax planning: Taking advantage of available tax benefits and minimizing future tax burdens. 

• Estate planning: Coordinating beneficiary designations and wealth transfer strategies. 

• Investment strategy: Aligning your portfolio across accounts to balance growth and risk. 

• Income planning: Converting your savings into reliable retirement income. 

By asking the right questions, taking full advantage of your employer match, and saving consistently, you’ll be well-positioned to create the retirement you envision—whether that means world travel, supporting family, or pursuing passion projects. 

Take the Next Step 

Your employer-sponsored retirement plan is a powerful foundation for building long-term wealth—but it’s not the full picture. High-net-worth individuals benefit from coordinating multiple types of retirement plans and investment strategies to achieve true financial independence. 

Plancorp’s team of fiduciary advisors can help you navigate contribution strategies, optimize tax benefits, and align your retirement plan options with your broader wealth management goals. 

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