In 2022, 62% of American workers had access to a defined contribution plan such as a 401(k), 403(b), or 457(b) plan. Source: U.S. Department of Labor, 2023 Employer-Sponsored Retirement Plans Employer-sponsored retirement plans such as Section 401(k), 403(b), and 457 plans offer higher contribution limits than IRAs. In 2023, you can contribute up to $22,500, plus an additional $7,500 if you are age 50 or older. You generally contribute a percentage of your salary using pre-tax funds (or after-tax funds to a Roth account), and you don’t have to pay current taxes on contributions or any earnings until you take withdrawals in retirement. Employers may offer to match a percentage of your employer-plan contributions with additional funds. Distributions from tax-deferred employer-sponsored retirement plans are taxed as ordinary income. (Roth employer plan distributions are tax-free.) Withdrawals taken prior to reaching age 59½ may be subject to a 10% federal income tax penalty. Generally, required minimum distributions (RMDs) from employer-sponsored plans must begin for the year in which you reach age 73 (for those who reach age 72 after December 31, 2022).