{"id":353934,"date":"2023-05-30T10:13:41","date_gmt":"2023-05-30T15:13:41","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/socialsecurity\/retirement-planning\/social-security-vs-401k.html"},"modified":"2026-02-17T15:50:04","modified_gmt":"2026-02-17T20:50:04","slug":"social-security-vs-401k","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/socialsecurity\/retirement-planning\/social-security-vs-401k.html","title":{"rendered":"Social Security vs. 401k"},"content":{"rendered":"\n
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Social Security vs. 401(k)<\/h1>\n\n
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\n By Jennifer Steinberg, Esq.<\/a> | Legally reviewed by Steven Ellison, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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You may use both Social Security benefits and your 401(k) savings in retirement. The government manages Social Security. Workers pay taxes into the system. When you retire, you may be eligible to receive monthly benefits. In contrast, a 401(k) is a private employer-sponsored retirement plan. Workers can choose how much to contribute from their paychecks.<\/p>\n\n <\/div>\n\n\n\n

As you think about retirement, you should plan for the sources of income you’ll have once you stop working. Social Security benefits and employer-sponsored retirement accounts, such as a 401(k), are two of the most common resources.<\/p>\n

These two retirement income sources work differently. This article will describe how you can use both during your retirement.\u00a0<\/p>\n

No matter how well you plan, you may run into problems when it’s time to collect your money in retirement. That’s when you can speak with a lawyer about your options. A Social Security and retirement attorney<\/a> can help you with denied benefits and more.<\/p>\n

Qualifying for Social Security Benefits<\/h2>\n

The Social Security Administration (SSA) may provide you with a monthly\u00a0retirement benefit\u00a0based on your work history. A typical earner must work for\u00a0at least ten years\u00a0before qualifying for this federal government benefit<\/a>.<\/p>\n

SSA bases your monthly benefit amount on your earnings as a taxpayer during your working years. It was during this time that you \u201cpaid into the system” by paying Social Security taxes. Higher earnings during your career result in higher retirement benefits. Similarly, if you delay retirement benefits<\/a> until after full retirement age, your monthly benefits will increase.<\/p>\n

Social Security retirement benefits come with automatic enrollment in Original Medicare<\/a> (Parts A and B). Your state may pay your Medicare premiums<\/a> if you have limited income and resources. You cannot contribute to a health savings account once your Medicare coverage<\/a> starts.<\/p>\n

When Your Social Security Retirement Benefits Begin<\/h2>\n

Early retirees may collect Social Security retirement benefits beginning at age 62. However, these benefits will be less than if you waited until\u00a0full retirement age<\/a> to claim them. Full retirement age depends on the year you were born. Full retirement age is 66 for workers born between 1943 and 1954. Full retirement age\u00a0rises gradually to 67\u00a0for those born in 1960 and later.<\/p>\n

At full retirement age, you can receive 100% of your earned Social Security benefits. If you\u00a0delay retirement, your benefits will increase yearly until you reach the age of 70. If you were born in 1943 or later, you will receive an 8 percent benefit increase each year until you reach age 70.<\/p>\n

401(k) Retirement Plans<\/h2>\n

A traditional 401(k) plan is an employer-sponsored retirement savings plan. The name 401(k) comes from the section of the federal income tax code that governs this type of retirement plan.<\/p>\n

These plans are tax-deferred. This means you do not pay income tax<\/a> on your 401(k) contributions. But you will pay tax to the Internal Revenue Service (IRS) on later withdrawals.<\/p>\n

Some workers consider a 401(k) an important employee benefit. The 401(k) is a \u201cdefined contribution plan.” This means you can decide how much of your salary you contribute to your account. The amounts you contribute are called \u201celective deferrals” because you \u201cdefer,” or delay, getting your money until retirement. Your contributions are invested<\/a> and distributed when you retire. The higher your investment returns, the more money you will have when you withdraw<\/a>.<\/p>\n

Some employers offer a Roth 401(k) plan. With this plan, you can withdraw your contributions tax-free at retirement. However, your contributions to a Roth 401(k) plan are taxed up front.<\/p>\n

If you do not have access to a Roth 401(k) plan through your employer, you can open a Roth individual retirement account (IRA) or \u201cRoth IRA.” High-earning individuals might not qualify for the advantages of a Roth IRA, but they can instead contribute to a traditional IRA.<\/p>\n

All About Contributions<\/h3>\n

Employers may match an employee’s 401(k) elective deferrals. A common matching contribution rate is 3%. This means that if you contribute 3% of your salary, your company will put the same amount into your 401(k). You may contribute more, but your employer will not match beyond the selected rate. Read the rules of your specific plan to understand your employer match.<\/p>\n

The law places\u00a0annual contribution limits<\/a> on elective deferrals. This amount can change each year. For example, the limit for an employee’s elective deferrals, including both traditional 401(k) and Roth 401(k), in 2026 is $24,500.<\/p>\n

Vesting Requirements<\/h3>\n

All employees must be 100%, or “fully,”\u00a0vested\u00a0in their plan when it is terminated. Being vested means that your employer cannot take back the money in your account for any reason.<\/p>\n

Your contributions to the plan are fully vested. However, you may have to forfeit any amounts your employer contributed if you don’t meet specific requirements. For example, some employers require that you work for a certain number of years to vest partially and additional years to vest fully.<\/p>\n

Types of 401(k) Accounts<\/h2>\n

You may be most familiar with the traditional 401(k) account. However, there are a few\u00a0other retirement plans\u00a0that you may want to learn about.<\/p>\n

Here are some basics of three other common plans:<\/p>\n