Do overall 401(k) contribution limits sum across employers?
Let me first start off by saying that you need to be careful with an S-Corp and defined contribution plans.  You might want to consider an LLC or some other entity form, depending on your state and other factors. You should read this entire page on the irs site:  S-Corp Retirement Plan FAQ, but here is a small clip: Contributions to a Self-Employed Plan You can’t make contributions to a self-employed retirement plan from your S corporation   distributions. Although, as an S corporation shareholder, you receive   distributions similar to distributions that a partner receives from a   partnership, your shareholder distributions aren’t earned income for   retirement plan purposes (see IRC section 1402(a)(2)). Therefore, you   also can’t establish a self-employed retirement plan for yourself   solely based on being an S corporation shareholder. There are also some issues and cases about reasonable compensation in S-Corp.  I recommend you read the IRS site's S Corporation Compensation and Medical Insurance Issues page answers as I see them, but I recommend hiring CPA You should be able to do option B.  The limitations are in place for the two different types of contributions:  Elective deferrals and Employer nonelective contributions.  I am going to make a leap and say your talking about a SEP here, therefore you can't setup one were the employee could contribute (post 1997). If your doing self employee 401k, be careful to not make the contributions yourself. If your wife is employed the by company, here calculation is separate and the company could make a separate contribution for her. The limitation for SEP in 2015 are 25% of employee's compensation or $53,000.  Since you will be self employed, you need to calculate your net earnings from self-employment which takes into account the eductible part of your self employment tax and contributions business makes to SEP.  Good read on SEPs at IRS site. and take a look at chapter 2 of Publication 560. I hope that helps and I recommend hiring a CPA in your area to help.
"Many employees don't contribute enough to maximize the match, so the cost to the employer is not the same.  Under the 50% of 6% strategy an employee contributing 5% would get a 2.5% match not a 3% and that saves the company 0.5%. @TTT provided an excellent link in the comments below to a study titled ""How much employer 401(k) matching contributions do employees leave on the table?"" performed by Financial Engines, an independent financial advisory service.  The information meaningful to this answer is on Page 5 (Page 7 of the PDF): 4,378,445 eligible employees were included in the study 1,077,775 of the eligible employees did not contribute enough for the full match; of them, 285,386 Received zero match funds 792,389 Received some match funds, but not the full match available So 792,389 or 18% of the employees studied contributed in to employer 401(k) plans but not enough to maximize their available match." One possible downside is contribution limit.  The 401K contribution limit is $18,000 for 2016, which is more than three times the limit for IRA contributions ($5,500). 4% of 30k ($1,200) is dwarfed by an $18,000 base pay increase. At 48k maxing out IRA will take ~11.5% of gross income, so at current position (30k salary) 401k contributions would likely be limited to the matching portion anyway. The long-term benefit of a deferred tax retirement plan can't fully be known since tax rates can change over time. If rates increase, the benefit can be mitigated. Personally, I only contribute to 401k enough to get full employer matching, and then I prioritize HSA, IRA, after those, some people like to go back to 401k to max, but I prefer other investments. At this low of an income range, the increase in base pay is far too significant to worry over potential differences in tax-deferred vs after tax investments. You can only contribute up to 5% of your salary? Odd. Usually 401(k) contributions are limited to some dollar amount in the vicinity of $15,000 or so a year. Normal retirement guidelines suggest that putting away 10-15% of your salary is enough that you probably won't need to worry much when you retire. 5% isn't likely to be enough, employer match or no. I'd try to contribute 10-15% of my salary. I think you're reading the rules wrong. I'm almost certain. It's definitely worth checking. If you're not, you should seriously consider supplementing this saving with a Roth IRA or just an after-tax account.  So. If you're with Fidelity and don't know what to do, look for a target date fund with a date near your retirement (e.g. Target Retirement 2040) and put 100% in there until you have a better idea of what going on. All Fidelity funds have pretty miserable expense ratios, even their token S&P500 index fund from another provider, so you might as let them do some leg work and pick your asset allocation for you. Alternatively, look for the Fidelity retirement planner tools on their website to suggest an asset allocation. As a (very rough) rule of thumb, as you're saving for retirement you'll want to have N% of your portfolio in bonds and the rest in stocks, where N is your age in years. Your stocks should probably be split about 70% US and 30% rest-of-world, give or take, and your US stocks should be split about 64% large-cap, 28% mid-cap and 8% small-cap (that's basically how the US stock market is split). Traditional and Roth 401k share a contribution limit of $16.5k. This means you could actually contribute to both if you wished to (say, if you weren't 100% on how taxes will change come retirement time), but the combined contributions for the year cannot exceed that limit. The numbers aside (I'd not assume 12%/yr) there is no limit to the balance. There are 401(k) accounts that have great matching and profit sharing deposits putting the per year limit closer to $45k, combine that with company stock in, say, Apple which has risen 60 fold this past decade, and balances in the tens of millions are possible. Your employer's matching contribution is calculated based on the dollar amounts you end up putting in. The nature of your 401(k) contribution—whether pre-tax or Roth after-tax—doesn't matter with respect to how their match gets calculated, and their match always goes into a pre-tax account, even if you are contributing after-tax. The onus is on you to choose a contribution amount that maximizes your employer match regardless of the nature of your contribution. Maximizing your employer match using Roth after-tax contributions will eat up more of your annual gross salary, but as long as you are willing to do that then you won't leave free employer match money on the table. Roth after-tax contributions don't get the tax deduction inherent in a pre-tax contribution. The tradeoff is that you end up with less take-home pay per period if you contribute the same number of dollars on a Roth after-tax basis to your 401(k) as opposed to on a pre-tax basis. For instance, to make a maximum $18,000 Roth after-tax contribution to a 401(k), it's going to cost you a lot more than $18,000 of your annual gross salary to net the same $18,000 number. (On the flip side, the Roth money is worth more in retirement than pre-tax money, because it won't be subject to taxes then.) However, 401(k) plan contribution amounts are almost always expressed as a percentage of gross salary, i.e. in pre-tax terms, even when electing to make after-tax contributions! So when electing after-tax, one is implicitly accepting that the contribution will cost more than the percentage of gross salary, because you'll need to pay the tax on a gross amount that would yield the same number of dollars but as an after-tax amount. One factor to consider is that some employers have a 401k contribution match policy that only allows a certain percentage of any given paycheck to be matched. So if the company is willing to match 4% of each paycheck, you could run into a problem here where you lose out on some of your company match. For example, suppose you get a $20,000 bonus. You can contribute $18,000 per year to your 401k and this bonus could be a nice way to knock most of that out and then take home your full paycheck the rest of the year. Sounds pretty nice, but there's a problem. The company will only match 4% of your $20,000 ($800) when they otherwise would have matched up to 4% of your annual salary ($4,000 if you're making $100,000 in this example). I'd say it's definitely worth it to make a big contribution to your 401k when you get a bonus as it's an easy way to get a lot of money in there without really feeling a loss (since it's extra money on top of your normal paycheck). But I'd definitely be careful about this situation. You don't want to throw away free money. To avoid this problem, make sure that you leave enough of your annual limit so you can contribute enough to get your 4% company match on every paycheck of the year. From the employer side there are A LOT of legal duties attached to sponsoring a 401(k).  If you are asking this question I would not suggest attempting to meet all of the regulations related to handling employee money internally. There are certain annual filings, periodic notices, accounting etc related to these kinds of plans, and the fines for non-compliance are extraordinary.  You would be far better off seeking a separate vendor, in my opinion. The maximum you can contribute to both the 403(b) and 401(k) is $18,000. Take the amount you already contributed and subtract it from $18,000. That's how much you have left to contribute before maxing out. "The company itself doesn't benefit. In most cases, it's an expense as the match that many offer is going to cost the company some percent of salary.  As Mike said, it's part of the benefit package. Vacation, medical, dental, cafeteria plans (i.e. both flexible spending and dependent care accounts, not food), stock options, employee stock purchase plans, defined contribution or defined benefit pension, and the 401(k) or 403(b) for teachers. Each and all of these are what one should look at when looking at ""total compensation"". You allude to the lack of choices in the 401(k) compared to other accounts. Noted. And that lack of choice should be part of your decision process as to how you choose to invest for retirement. If the fess/selection is bad enough, you need to be vocal about it and request a change. Bad choices + no match, and maybe the account should be avoided, else just deposit to the match.  Note - Keith thanks for catching and fixing one typo, I just caught another." Didn't see it mentioned so far, but depending on modified AGI you may be prevented from a tax deduction for your contribution to a Traditional IRA if you or your spouse are offered a retirement plan at work, even if you don't participate in it.  See the IRS page here for the details of deduction limitability: https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work In my opinion, because I heavily favor all the benefits of the Roth, I'd contribute first to a Roth IRA and then to the Roth 401(k).   The former first because it puts the money in a place where you have more control over fees and how it is invested.   The latter because the contribution limits are much higher than the IRA, and the money grows tax-free and incurs no taxes on withdrawal. The company match is not earnings. My company deposits 5% of my income into my 401(k) and it appears nowhere except on the paperwork for the 401(k).  To be clear, it doesn't appear on any paystub or W2. I routinely max out my 401k contributions.  The company's stupid website actually forces me to make two contributions -- one for the regular contribution, and another for the Catchup Contribution. I routinely adjust my 401k contribution throughout the year -- at the first of the year, I calculate how much to withhold such that I can adjust withholding to 6% of salary more than before, once I hit the SS tax limit.  At the first of the year, I ignore bonuses.  I re-adjust (if needed) once I know bonuses. I've worked for my company for almost 30 years now. You cannot withdraw funds from a 401(k) while still employed with your company. To access your contributions, that would be treated as a loan against the 401(k), in which case you'd pay an upfront fee, and then have to repay the amount loaned, plus interest, over a set period of time. (In essence, you are paying back yourself.) Typically, there is also a minimum amount you must take out as a loan. Should you leave the job and still have an outstanding loan against your 401(k), it will be treated as a withdrawal after a certain date, at which point a 10% penalty plus taxes applies, unless you pay back the full amount of the loan remaining before that certain date. Your friends should seriously consider contributing the minimum amount necessary to get that full 50% matching amount. It's free money. As you said, it's like leaving money on the table.