When it comes to 401(k) plans, you may be missing out on benefits that you don’t know about.
Your 401(k) plan doesn’t have to offer all the tax-savings provisions that the IRS allows for 401(k) plans. So, not all plans have every possible 401(k) feature, which means there may be perks you don’t realize exist.
The only way to find out what options your 401(k) offers is to ask your plan or your employer.
Not sure where to start? Money Talks News asked financial experts to weigh in on some little-known 401(k) provisions to be aware of.
1. A Roth option
Here’s a great secret: the Roth 401(k). This type of tax-advantaged account is much like a traditional 401(k), but one key difference is that you contribute post-tax dollars rather than pre-tax dollars to Roth accounts.
So, contributions to Roth accounts are not tax-deductible, but they grow tax-free and money can be withdrawn tax-free in retirement.
On the other hand, contributions to traditional accounts are tax-deductible in the tax year for which they are made, but contributions and earnings are taxable in the year in which you withdraw them.
Marisa Rothstein, a certified financial planner (CFP) with Siena Private Wealth, tells Money Talks News:
“Even for high-income professionals who benefit from the tax-deductibility of traditional 401(k) contributions, it can still make sense to incorporate a Roth 401(k).
Unlike traditional 401(k) accounts, which mandate fixed required minimum distributions (RMDs) at a certain age, the Roth 401(k) provides significantly more control over your retirement assets.”
For 2025, you can contribute no more than $7,000 to a Roth individual retirement account (IRA), or $8,000 if you’re aged 50 or older. But the contribution limit for a Roth 401(k) is $23,500 or $31,000, depending on age (the same as that for a traditional 401(k)).
We break this down further in “IRS Hikes Various Retirement Account Limits for 2025 (Including the First IRA Catch-up Hike in Ages).”
2. Rollovers
You may be able to roll an old 401(k) plan from a former employer into your current 401(k), basically meaning moving the money from your old 401(k) into your new one.
David Flores Wilson, a CFP and managing partner at Sincerus Advisory, tells Money Talks News:
“Whether to roll over a 401(k) from a previous employer involves a variety of factors. To make an informed decision, you’ll want to evaluate the investment choices and fees on the old plan versus the new plan.
As well, there may be fees for leaving your funds in the old plan without being employed there anymore. Sometimes the most compelling reason to roll over the old plan into the new plan is to minimize the administrative hassle of multiple accounts and logins.”
Of course, even if rolling an old 401(k) into a new one is a good option for you, it’s not your only option. Another is to roll your old 401(k) into an IRA.
“A rollover IRA will likely increase the selection of investment options versus keeping it in your old or new company plan. Fees may increase or decrease depending on how it’s managed. However, a rollover IRA doesn’t have the same asset protection that Employee Retirement Income Security Act (ERISA) plans like 401(k) plans have,” Wilson says.
3. Loans
You may be able to borrow funds tax-free from your 401(k) account before the age of 59 1/2. But know what you’re getting into.
Andrew Herzog, a certified financial planner and associate wealth advisor at The Watchman Group, tells Money Talks News:
“It’s important to know that a 401(k) loan can be income-tax-free and penalty-free, but generally speaking, you must repay that loan — with interest — within a short period of time. Otherwise, you will become subject to taxes and potential penalties on the outstanding balance.
It also doesn’t require a credit check like a standard bank loan, so it’s quicker and more convenient if you’re looking to pay off higher-interest debts.”
You should do everything in your power to avoid borrowing money from any retirement account. It’s essential instead to build an emergency fund to use when you fall on tough times.
Even if you truly have no other option than to borrow against your golden years, know that it could cost you more than you realize upfront.
The interest you pay on a 401(k) loan goes back to your own 401(k) account, so there’s technically no loss for you there. But there could be a cost to the amount of principal that you borrow.
You will lose out on however much money the principal could have earned from long-term market gains had you never borrowed from your 401(k).
“You must realize there’s an opportunity cost for the loan — your 401(k) funds are no longer invested and earning equity-like returns, so you better have a good reason for borrowing from your future self,” Herzog says.
4. Advice from a professional
Can you get advice from a professional about managing your 401(k) plan? The best plans offer access to such a pro.
Charles Pastor, a certified financial planner, tells Money Talks News:
“If you’re not sure how to invest your savings, many 401(k)s have plan advisors who can explain your options. Typically, help is just a phone call away if you have questions about your retirement plan.
Plan advisors can oftentimes help you understand what investments are available to you and whether they are appropriate given your circumstances.”
If you need or want to consult a financial professional — one who is bound to put your best interest before his or her own wallet — but you don’t have access to one through your 401(k), one easy option is Money Talks News partner SmartAsset. This free referral service can help you find vetted independent, fiduciary financial advisors well suited to your needs.
5. After-tax contributions
While you contribute pre-tax dollars to a traditional 401(k), you might also be able to make after-tax contributions once you contribute the maximum allowed amount of pre-tax dollars.
“A 401(k) secret that people should be aware of is the ability to contribute after-tax dollars to your 401(k),” says Aaron Parrish, a CFP at Level Wealth Management in Greensboro, North Carolina. “Not all 401(k)s allow this because it is determined by the employer.”
Another secret: This could also essentially enable you to put more money into a Roth IRA — even if you earn too much income to be eligible to contribute to a Roth IRA, Parrish tells Money Talks News.
He explains:
“Theoretically, a high-income earner could max out their pretax contributions and then contribute after-tax dollars to their 401(k) up to the combined employee/employer contribution limit of $69,000, or $76,500 if 50 or older. Once they [leave their employer], the after-tax portion of their 401(k) can be rolled into a Roth IRA.”
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