Everyone knows a 401(K) is a tax-advantaged way to save for retirement and that many companies offer a matching component, but did you know there are several other features associated with a 401(k)?
After all, it benefits everyone if Americans save for their retirement, so juicing up 401(k) plans makes sense. For the government, it may relieve some of the burden for supporting older Americans in retirement, and for companies, it can be a great way to recruit and retain workers. The cost of turnover typically outweighs the expenses associated with offering a 401(k) plan.
“It was probably meant as an additional way to save, but it really became the default,” says Stuart Robertson, CEO of ShareBuilder 401k. “It’s the most powerful tax-advantaged account in the U.S. It has large contribution limits, automatic payroll deduction, fiduciary oversight and it’s not leaving people to go blow themselves up in the stock market.”
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Upgrades to 401(k) plans have been occurring over the years. In 2001, catch-up contributions for older workers and Roth 401(k)s were added, but it wasn’t until the SECURE Act and the SECURE Act 2.0 passed in 2019 and 2022, respectively, that big additions were made to 401 (k) plans.
That’s great news for retirement savers, granted they take advantage of them. Here’s a look at six perks of having a 401(k) plan you may not know about.
1. Super catch-ups
New to 401(k) plans in 2025, this provision of the SECURE Act 2.0 enables workers between 60 and 63 to save an extra $11,250 in their 401(k). That’s higher than the $7,500 workers over 50 can save in standard catch-up contributions.
All told, for 2025, older workers can save as much as $34,750 in a tax-advantaged retirement savings account. Super catch-ups are designed to address the lack of retirement savings among people 50 and older.
“It’s a neat way for a lot of people who started late and are in a good financial position to catch up,” says Robertson. “To take advantage of it you have to be a pretty good earner.”
Just make sure you also consider the potential downsides of super-catch-ups, such as tying up your money in a 401(k) plan that may have poor investment options.
2. Hardship loans
While not new to 401(k)s, the SECURE Act 2.0 made it a whole lot easier to take a hardship withdrawal. Instead of applying for it and your employer signing off, many plans now let you self-certify the hardship, which reduces the paperwork necessary to take the withdrawal, says Robertson.
Plus, you can withdraw up to $1,000 per year from your 401(k) for unexpected or immediate financial needs relating to emergency expenses without being hit with a 10% early withdrawal penalty if you are under 59½. You do have to pay income taxes on the withdrawal. You also don’t have to pay back the loan, but you have to wait three years before you can apply for another hardship withdrawal.
If you are 59½, you don’t have to worry about the 10% penalty, regardless of the amount you borrow. If you are under 59½ and want to take a loan of more than $1,000, Robertson says to consider other options and use that as a last resort.
3. Access to financial advisers
A growing trend among some 401(k) plans is providing employees with access to a self-directed brokerage account (SDBA). With an SDBA, you have access to more investment options, such as individual stocks, exchange-traded funds (ETFs), a wider choice of mutual funds and fixed-income products. You can manage your SDBA on your own or use a financial adviser.
Not all plans offer these options, and the advice doesn’t come free. You can get free educational information about how your 401(k) plan works, but beyond that, expect to be hit with some type of fee.
“Generally, if someone is putting in the time and work, they are looking to earn something for that advice,” says Robertson.
4. Automatic enrollment
Automatic enrollment into a 401(k) kicked off at the beginning of 2025 and applies to any new plans established after December 29, 2022.
A byproduct of the SECURE Act 2.0 is that it aims to boost employees’ retirement savings by enrolling everyone in the 401 (k) plan by default instead of having employees opt in. Now, they have to opt out.
Typically, the automatic enrollment starts at 3% of your salary and increases 1% each year up to a maximum of 10%.
The shift to digital tools is driven mainly by the evolution of technology in financial services rather than any specific legislation. Many 401(k) providers give you access to digital tools from their websites that enable you to do everything from choose the right fund to determine how much you need to save to meet certain goals.
Most of the time, these tools are free and can provide invaluable information to help you save for your retirement. Digital tools “make it more efficient for the employee to get into the right investments versus randomly picking a fund,” says Robertson, noting the type of tools you have access to depends on the provider and its approach to technology.
6. Annuities
Aiming to give people access to guaranteed lifetime income in retirement, a provision in the SECURE Act enables 401(k) providers to offer annuities in their plans. It’s something retirement savers are craving, given retirement can easily last 30-plus years. Still, it’s not that common in 401 (k) plans yet.
According to a survey by LIMRA, the annuity trade association, last year, about 4 in 10 plan sponsors said they were either actively considering or had decided to add an annuity to their retirement plan.
“While annuities are talked about, it’s not a popular offering in the 401(k) space,” says Robertson.
More to come
The 401(k) plan has evolved since it was first introduced in the 1980s. While it was designed to be an add-on, the end of pensions at many companies made it the de facto way to save for retirement.
With concerns about Social Security’s fate in the years to come, 401(k) plans will only grow in importance.
Stay tuned to see what perks are up next for this tax-advantage way to save for your golden years.
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