What is a 401(k) plan?

With pension plans becoming increasingly rare (46% of companies offered them in 19801 but that fell to 11% by 20212), employer-sponsored 401(k) plans are now the go-to way to save for retirement. You simply put a percentage of your paycheck into an account to help you save for the kind of retirement you want—some employers will even give you what is essentially free money by matching your contributions. Enrolling in a 401(k) plan is a smart way to make your retirement plan even stronger, and the sooner you start, the more time your money will have to grow.

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Which 401(k) plan is right for you?

Employers typically offer two plan types: Traditional and Roth. Here's the difference between them and how they can help you save for the retirement you've always dreamed of.

Traditional 401(k)

Use pre-tax dollars (meaning before taxes are taken out) to not only save for retirement, but also reduce your taxable income today. Once you start making withdraws in retirement, you'll be taxed at your income level then which may or may not be lower than today.

Roth 401(k)

You can make contributions that will be taxed at your current income level, but once you start making withdrawals in retirement, they'll typically be tax-free. This option may be better for people who expect to be in a higher tax bracket in retirement.

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How can a 401(k) plan fit into your retirement plan?

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The best retirement plan will generate the right amount of retirement income needed to live the way you want. While an employer-sponsored 401(k) plan can help, it's not the only way. Depending on your goals, your plan could also include diverse sources such as IRAs, health savings accounts, the cash value of a life insurance3 policy, annuities, social security, savings, and investments. Our financial advisors will help make sure that you have the right tax-efficient income strategies and financial protection needed to retire the way you've always dreamed of.

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401(k) planning: a key to a smart financial plan

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At Northwestern Mutual, we see your 401(k) as just one part of your overall financial plan. Through your financial advisor, you'll have access to other financial options, including investments for growth, insurance for protection, and annuities for more financial flexibility. Each is designed to reinforce the other so your personalized plan can work its hardest for you. Here's what our version of financial planning can do for you:

  • Help grow your money with investments for today and in retirement
  • Make the most of what you have with recommendations for saving and paying down debt
  • Protect everything you've worked so hard for
Our approach to planning

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The Northwestern Mutual difference

Top 5 ranked investment service

We're one of the top U.S. Independent Investment Broker-Dealers.4

Ranking for Northwestern Mutual Investment Services LLC, Financial Advisor magazine and InvestmentNews, April 2021

5.0M+ clients at Northwestern Mutual

The number of people we're proud to call clients, and who put their trust in us.5

164+ years strong through depressions, downturns, and pandemics

The number of years we’ve been there for our clients—through depressions, downturns, and pandemics.

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Ready to put a 401(k) to work for you?

Our financial advisors will create a retirement plan, which may include a 401(k), based on your priorities and goals so you can retire when you want, the way you want.

It's easy to get started—no commitment, just a conversation.

Broker-Dealer Disclosure

To learn more about Northwestern Mutual Investment Services, LLC and its financial professionals, visit FINRA BrokerCheck®.

Visit our Client Relationship Summaries (Form CRS) for information about our firms that provide brokerage and advisory services.