Where the money lives

Lesson 5 ended with a recommendation you could act on: for long-term money, a broad, cheap, diversified fund beats picking, and the evidence for that's about as strong as evidence in this field gets. Then it stopped, because there was a question underneath it that could not be answered yet. You have chosen the fund. Where does it go?

Not "which company holds it". Which kind of account. Because the same fund, holding the same shares of the same companies, earning exactly the same return, will leave you with meaningfully different amounts of money depending on which of three containers you put it in, and the difference comes entirely from when the tax is charged.

This lesson is about those containers, about the one place where an employer will hand you money for using them, and about the order to do things in when you can't do everything at once.

A note on where this applies. The specific accounts here are US ones: the 401(k), the 403(b), the traditional IRA, the Roth IRA. If you are reading from elsewhere, the machinery has a different name and usually a similar shape; the UK has ISAs and workplace pensions with auto-enrolment, Canada has RRSPs and TFSAs, Australia has superannuation with a compulsory employer contribution. The question to take to your own system is the same one this lesson answers: which accounts change when my money is taxed, does my employer contribute, and what do I have to do to get all of it? The arithmetic below does not care what the accounts are called.

An account is not an investment

Start here, because this single confusion costs more people more money than anything else in the lesson.

A 401(k) isn't an investment. Neither is an IRA. They are wrappers. A wrapper is a set of tax rules that applies to whatever you put inside it, and it has no return of its own. Inside the wrapper you still have to choose something to hold: a fund, several funds, bonds, cash. The wrapper decides how the growth is taxed. The thing inside decides whether there is any growth to tax.

This isn't an abstract distinction. It is entirely possible, and common, to open a retirement account, move money into it, feel that you have done the responsible thing, and leave the money sitting in the account's default cash option for a decade. The account was opened. Nothing was invested. Some plans default new money into a target-date fund, which does invest it; others leave it in cash until you choose, and the only way to know which yours does is to look.

So: the first thing to do with any retirement account, before any of the clever decisions below, is to open it and read what it's holding, and what that holding charges. Lesson 5 gave you the method, and it transfers here with one difference. In a brokerage account you can buy nearly anything. In a workplace plan you choose from a menu somebody else wrote, which may be short and may be expensive. You still apply the same test, the expense ratio, and you still pick the cheapest broad option available, but you are picking from what is there.

Three wrappers, one dollar

The whole mechanism fits in one picture. A dollar you earn can travel three routes. Watch where the tax happens on each.

Three things to take from the picture, in order of how surprising they are.

The taxable account loses, and it loses to the tax on growth rather than to the tax on income. All three routes pay income tax once. The taxable route pays a second tax that the other two do not: tax on the growth. In this example that is $360 on $2,400 of gain, and the real figure is worse than shown, because a fund throws off dividends most years and those are taxed as they arrive, so the compounding happens on a slightly smaller number every year. That's the honest case for using a wrapper at all.

Traditional and Roth came out exactly the same. Not roughly. Exactly, to the dollar. This surprises nearly everyone, so it is worth seeing why. The traditional route multiplies by 4 (growth) and then by 0.8 (tax). The Roth route multiplies by 0.8 and then by 4. Multiplication does not care about the order. If your tax rate is the same when the money goes in and when it comes out, the two accounts are the same account wearing different clothes.

Which means the entire traditional-versus-Roth argument is about one thing: whether your rate when the money comes out will be lower or higher than your rate today. Everything else people say about it is either a consequence of that or one of the tie-breakers below.

The tie-breakers, and why "hold some of each" is not a cop-out

The clean result above says: contribute traditional if your rate will fall, Roth if it will rise. The difficulty is that you are being asked to forecast your own income, and the tax law, decades ahead. Nobody can do that. So here is what else is on the table, each of which can outweigh a small rate difference.

Nobody knows their future rate, and that is a reason to split. Tax rates change by law, not just by your salary. Holding some money in each wrapper means that whatever happens, half of your money is in the right one, and in retirement you can choose which account to draw from in a given year, which is itself a way of managing your rate. This isn't indecision. It is the same argument as diversification in lesson 5: when the future is genuinely unknown, spreading is a decision rather than an absence of one.

The contribution limit's stated in nominal dollars, which quietly favours Roth. Both wrappers cap what you can put in each year at the same number, whatever this year's figure turns out to be.¹ But a dollar in a Roth is a dollar that will never be taxed again, and a dollar in a traditional account is a dollar that still owes tax. If you are contributing the maximum and would otherwise put the leftover cash in a taxable account, the Roth shelters more real money behind the same nominal cap. If you are not near the cap, this argument does not apply to you at all.

The same page carries the fact that makes this a choice at all: the annual limit's shared between your traditional and Roth IRAs. They are one bucket with two taps. You are not deciding which account to open; you are deciding how to split one allowance.

Access differs, and this one is practical. Money in a Roth IRA comes out in a fixed order, your own contributions first, and those were taxed before they went in, so they come back out without tax or penalty at any age. Earnings are a different matter and have their own rules. This makes a Roth IRA the least locked of the retirement wrappers, which matters if your cushion is thin. It's not a reason to treat it as a savings account.

Traditional accounts eventually force money out; Roth IRAs do not. A traditional IRA has required minimum distributions starting at 73 today, so the government eventually collects. Treat that age as a moving figure; it has changed twice in five years, and it is scheduled to move again to 75 for people born in 1960 or later. A Roth IRA has none for the original owner, which is why it is the wrapper people use when they expect not to need the money.

Most of this applies inside your workplace plan too, with two exceptions. Many 401(k) and 403(b) plans now offer a Roth option alongside the traditional one, and the rate-now-against-rate-later arithmetic is identical there. Two of the tie-breakers above are not: the free access to your own contributions and the absence of required minimum distributions are properties of a Roth IRA, and they don't carry over to a Roth 401(k). What is unaffected either way is the match, which lands on your contribution whichever flavour you chose.

And one from lesson 6 that people miss. A traditional 401(k) contribution reduces your income tax and not your payroll tax, because Social Security and Medicare are charged on your wages before that deduction. So the saving from a traditional contribution is your income-tax marginal rate, not your total federal rate. If you were mentally counting 7.65% of payroll tax as part of what you were avoiding, take it back out.

The match, which is the one place the arithmetic is not close

Everything above is a matter of degree. This next thing is not.

If your employer matches contributions, then for every dollar you put in up to the threshold, they put in some fraction of a dollar alongside it. A common formula is 50 cents per dollar on the first 6% of your pay. Contribute 6%, and your account grows by 9% of your pay. The 50% isn't an annual return. It is an instant one, credited the moment the money lands, before any market has done anything.

Nothing else in personal finance offers that. Lesson 5's whole case for index funds rests on a long-run average of around 7% a year after inflation, with terrible years included. This is 50% on the day.

Work it through. Elias earns $50,000, and his plan matches 50% on the first 6%.

• 6% of $50,000 is $3,000, which is what he must contribute to capture the whole match.
• The employer adds $1,500.
• Because a traditional contribution comes out of pre-tax income, at a 20% marginal rate the $3,000 costs him $2,400 of take-home pay.
• So $2,400 out of his pocket becomes $4,500 in his account, the same day. Hold on to that pair of numbers, because the comparison later in the lesson needs them to be measured the same way.

Put the match next to the thing people usually compare it with, and the scale of it is hard to argue with. A good year in the market, applied to the same $3,000, adds $210. The match adds $1,500 on the day the money lands.

Now the version that shows what skipping it costs. If Elias contributes nothing for ten years, and the forgone match would have grown at 7% a year after inflation, he ends those ten years about $20,725 poorer, in today's buying power, than the version of himself who contributed. That is not the whole account. That is the employer's part alone, which he could have had for filling in a form.

What actually happens, and the finding that should change your plan

Between 20% and 60% of employees at the seven companies in one careful study contributed less than their employer would match.⁷

The interesting part of that study is a narrowing. You can construct sensible reasons to skip a match: the money is locked up until 59 and a half, I might need it sooner, I might leave before it vests, I don't know my future tax rate. So the researchers looked at employees who were over 59 and a half, already fully vested, and free to withdraw for any reason without penalty. For that group, contributing below the match threshold and immediately withdrawing the money is strictly better than not contributing, in every scenario, whatever they believe about anything. It is what economists call a dominated choice, meaning no set of preferences makes it right.

At the average firm in the study, 36% of that group did it anyway, giving up about 1.6% of their annual pay, an average of $507 a year.

Then the researchers tried the obvious remedy. They ran a survey explaining the free lunch to the people forgoing it. Contribution rates rose by 0.67% of income, an amount that couldn't be distinguished from zero.

Sit with that, because it is a finding about you and not only about them. Knowing a thing is not the mechanism that makes it happen. This is the same result as lesson 2's, where automatic escalation moved saving rates from 3.5% to 13.6% while good intentions moved almost nothing. The practical conclusion is the one the exercise at the end of this lesson insists on: don't finish this lesson intending to check your contribution rate. Change the setting while the page is open, or write the date you will do it in your calendar with the login page bookmarked.

The default is doing more work than you are

There's a second half to that finding, and it is the reason participation figures have moved at all. If information does not change behaviour, defaults do. The share of workplace plans that enrol you automatically, so that you have to act in order not to save, rose from 10% in 2006 to 61% in 2024, and participation among eligible employees now runs at 86%.³ The Bureau of Labor Statistics figure for all private-sector workers is 53%, and most of the gap between those two numbers is the difference between being offered a plan and being put into one.

That's good news with a sharp edge in it, and the edge is the most common version of this lesson's mistake. Auto-enrolment picks a rate for you, and nearly two thirds of plans now default at 4% or more, with about a third defaulting at 6%. Which means the rest default lower. If your plan enrolled you at 3% and matches to 6%, you are saving, you feel like someone who is saving, and you are leaving half the match behind, having never made a decision about it. Nobody will write to tell you.

Reading your own plan, since the averages will not tell you

There is a reason this lesson keeps saying "look it up" rather than giving you the number. Look at what the largest published dataset of US workplace plans, Vanguard's annual How America Saves, covering roughly five million people, actually finds.³

• Half of plans offer a match and nothing else. Another 36% offer a match plus a separate employer contribution. 4% of plans make no employer contribution of any kind.
• Among plans with a match, 68% use a single-tier formula, such as 50 cents on the first 6%. A quarter use a multi-tier formula, such as a dollar per dollar on the first 3% and then 50 cents on the next 2%.
• The single most common formula in the whole dataset, 50% on the first 6% of pay, is used by 13% of plans. The next four most common are 100% on the first 3% and 50% on the next 2% (10%), 100% on 6% (9%), 100% on 5% (7%), and 100% on 4% (6%).
• The average promised match is 4.6% of pay; the median is 4.0%. To capture the whole thing takes an average contribution of 6.5% of pay, median 6.0%.
• Nearly half of plans vest matching contributions immediately. One in four plans with a match uses a five- or six-year graded schedule.
• The average account balance is $148,153. The median is $38,176. Nearly three participants in ten have less than $10,000.

That last pair is lesson 1's habit arriving in a new place. The mean here is almost four times the median, because a small number of very large accounts pull it up, so any sentence beginning "the average American's retirement account" is describing a person who doesn't exist. When you read a balance statistic, ask which of the two it is.

The number to notice is the 13%. "The most common match formula" describes roughly one plan in eight. Seven readers in eight who assume the common formula applies to them are wrong about their own money, usually by a few hundred to a couple of thousand dollars a year. This is the reason the practice section asks you to find your plan's actual formula and write it in a sentence.

And these figures come from one recordkeeper's book of business, which skews toward larger employers with better plans. They describe plans that exist. They do not describe the workforce, which is a different matter taken up at the end of the lesson.

Vesting: whose money is it

One more thing to look up while you are in there.

Your own contributions are always entirely yours. The IRS states it flatly: an employee's own contributions are always 100% vested.² Nothing your employer does, and nothing you do short of spending it, changes that.

The employer's contributions can be different. A plan may use cliff vesting, where you own none of the match until a date, often three years, and then all of it at once. Or graded vesting, where you own a rising share each year, often reaching 100% at six. Leave the day before a cliff and the matched money goes back to the plan.

This changes the arithmetic for anyone who might move. If you expect to leave inside a year and your plan has a three-year cliff, the match isn't $1,500 of certain money; it is $1,500 multiplied by your real chance of staying three years. That may still be a good bet, and your own contributions are worth making either way, but it is a bet rather than a certainty, and the standard advice to "always take the match" is written for the immediate-vesting half of plans without saying so.

The order of operations, and why it is a judgement rather than a theorem

You have limited money and four things want it: a cushion, an employer match, expensive debt, and long-term saving. One defensible order follows, and then an honest account of where it comes from.

1. A small cushion first. Not the full three to six months. A floor, because without any cushion the first unexpected bill goes on the card and undoes everything below. Lesson 2's evidence points at about $2,000, and it was careful to say that the finding is correlational; the $1,000 figure you will hear more often is a convention rather than a finding.
2. Then contribute enough to capture the whole employer match. This is the step people put last, and the rest of this section is the argument for putting it second.
3. Then attack high-rate debt, using lesson 3's method and whichever ordering you'll actually finish.
4. Then build the cushion to its full size, and raise retirement contributions past the match. The order between these two depends on how steady your income is.

Step 2 is the one that looks wrong, so the argument deserves stating in full. Elias has a 24% card. The card is the highest rate in his life, and lesson 3 said to attack the highest rate. So compare what the same money out of his pocket does in each place, and measure both sides after tax so the comparison is fair. Take $2,400 of take-home pay. Against the card, $2,400 saves about $576 of interest over a year. Into the plan, that same $2,400 becomes a $3,000 contribution and captures $1,500 of match. The match is worth roughly two and a half times as much in the first year alone, and that is before anything grows. (Strictly, the matched money is pre-tax and the interest saved is after-tax, so if you tax the match at the same 20% on the way out, the comparison is about $1,200 against $576. It's still more than double.)

The stronger argument is that the two are not symmetric in time. If he pays the card next year instead of this year, it costs him a year of interest, and the debt is still there to pay. If he skips this year's match, the match is gone. There is no mechanism for making last year's contribution. The match expires; the debt waits. That asymmetry is the argument, and it holds even when the card's rate is higher than the match, right up until the debt is so large or so fast-growing that another year of it threatens default.

Which is where the honesty comes in. This ordering is a judgement about failure modes, not a proof. Somebody with a 29% card, no cushion, and hours being cut faces a real chance of missing a payment, and a plan that routes money into an account they can't touch until 59 and a half is a plan that might blow up. For that person, cushion and debt come first and the match waits. The order above is right for the common case and wrong for some cases, and you are the one who knows which you are in.

The lock, and what to do about it

Retirement wrappers trade access for tax treatment. Take money out of a traditional 401(k) or IRA before 59 and a half and you generally owe income tax on it plus an extra 10%.⁴ That is the deal: the tax advantage exists to keep the money there.

There are exceptions. The IRS lists them, and they include separation from service after age 55, total and permanent disability, substantially equal periodic payments, large medical expenses, and (since the end of 2023) certain emergency and domestic-abuse distributions. You should know these exist, and you shouldn't build a plan on them. Two reasons: each has conditions that are easy to get wrong, and money taken out early stops compounding forever, which is the cost that does not show up on the withdrawal form.

One thing this course will say flatly. Don't raid a retirement account to pay unsecured debt. Credit-card debt is unpleasant and it is also unsecured, which means the worst outcomes are collections and a damaged credit record. Retirement accounts have strong protections in bankruptcy that ordinary savings do not. Converting protected money into a payment on unsecured debt, and paying tax and a penalty to do it, is trading away the thing that would still be standing in the worst case. If the debt is genuinely unmanageable, a non-profit credit counsellor is the next step, not the 401(k).

This is also the reason the cushion in lesson 2 sits in a plain savings account and not in a retirement wrapper. It is not that a savings account is a better investment. It's that a cushion has one job, being available on a Tuesday afternoon, and a wrapper that charges 10% for that is not doing that job.

What people get wrong

"A 401(k) is an investment." It's a wrapper. Inside it may be a target-date fund, a mediocre expensive fund, or cash. Look.

"Roth is better" (or "traditional is better"). Neither is better as a general claim, and the arithmetic above shows they are identical when your tax rate is unchanged. The real question is your rate now against your rate later, and since nobody knows the second number, having some of each is a defensible answer rather than a failure to decide.

"I'll do retirement later; the cushion and the debt come first, always." Right about the cushion floor, wrong about the match, and the match is the expensive half of the mistake.

"It's locked up until 59 and a half, so it's gone." It is illiquid, which is a real cost and the reason for the cushion. It is not gone: exceptions exist, Roth IRA contributions come back out freely, and in most cases the money is yours in a form you can see.

"I'm too young for this to matter." Lesson 4 answered this with the arithmetic of runway, and the match adds a second answer. The match is a percentage of this year's pay, and this year happens exactly once.

"My employer contributes, so I'm fine." Roughly one plan in eight uses the formula people assume is standard, one plan in twenty-five makes no employer contribution of any kind, and a quarter of plans with a match make you stay five or six years to keep it. Every one of those is knowable in ten minutes.

The argument about the system, and what isn't in dispute

You cannot teach this machinery honestly without noticing that the machinery itself is contested, so the disagreement belongs in the lesson, stated in a way that both sides would recognise.

One position is that the shift from traditional pensions to 401(k)-style accounts was a transfer of risk, and the Economic Policy Institute's report "The State of American Retirement" is the best-known statement of it.⁶ A pension promised a defined benefit and put the investment and longevity risk on the employer. A 401(k) promises a defined contribution and puts both risks on the individual, along with the decisions: how much to save, what to hold, what to do in a crash, how to make a lump sum last. The longevity half of that's the part with no workaround, because a pension pays until you die and a balance can be spent before you do, and nothing in a 401(k) menu does what an annuity does. On this view the unequal outcomes are exactly what you would expect when a technical burden is handed to people with unequal time, information and slack, and workers were never asked whether they wanted it.

The other position is that plan design is not the binding problem, coverage is. Researchers at Boston College's Center for Retirement Research have argued that the trouble is that roughly half of private-sector workers are not participating in any workplace plan at a given moment, and that the top third who are continuously covered do reasonably well while the bottom third who are almost never covered end up relying on Social Security.⁹ They also argue against the nostalgia directly: traditional pensions were back-loaded, paying off for long-tenure employees and much less for the rest, at a time when only about a third of workers in their late forties have been with the same employer for ten years, and their benefits are usually not indexed to inflation, so a fixed pension has lost more than a fifth of its buying power since 2021.

Each side has an answer to the other, and the answers are worth having. To the back-loading point, the first position replies that pensions were standard in the sectors and the era when coverage was highest, so comparing a pension you would have had against a 401(k) you have isn't the same as comparing plan designs in the abstract. To the longevity point, the second position replies that the fix is a better decumulation option inside the current system rather than a return to a plan that most workers left before it paid.

What kind of question is this? Not an empirical one, in the end. Both sides use the same statistics. What they disagree about is what the retirement system is for: whether its job is to make an adequate income in old age near-universal, in which case coverage and guarantees are the measure, or to give people a tax-favoured way to save their own money, in which case take-up and returns are. That is a value question resting on shared facts, and this course does not answer it.

What both accept, and what the Bureau of Labor Statistics measures, is who is offered what.⁵ In March 2025, 72% of US private-industry workers had access to a retirement plan at work and 53% participated. Among the lowest-paid quarter, 49% had access and 23% participated. Among the highest-paid tenth, 93% had access and 83% participated. Access runs from 59% at employers with fewer than 100 workers to 90% at employers with 500 or more.

And one more shared fact, which matters for how you read the advice in this lesson. Higher earners contribute a larger share of their pay than lower earners do, about 6.1% against 2.8% for the bottom half, and lower earners' balances depend more heavily on the employer's contribution and are hit repeatedly by job loss and pay cuts that barely touch the top tenth.⁸ "Just contribute 6%" is easy advice to give and it's not equally easy advice to take.

This course takes no position on what should change. It teaches the system as it is, tells you where the money is, and says plainly that a large minority of people are not offered the thing this lesson is about.

Practice

Connections

This lesson answers a question lesson 3 explicitly deferred. When you were ranking debts by rate, there was a fourth option that could not be ranked yet, because it was not a debt: the employer match. It turns out to sit above almost everything, for a reason that has nothing to do with its rate and everything to do with the fact that it expires.

It also completes lesson 5. That lesson chose what to hold; this one chose where to hold it. The two decisions are separate, and confusing them is what puts money in a retirement account and then leaves it in cash.

Lesson 6 supplied the number the traditional-versus-Roth choice runs on. A marginal rate was an abstract idea then; here it's the only input to the decision, and lesson 6's warning about the difference between a marginal and an effective rate matters, because using the effective rate here gives the wrong answer.

Lesson 4's compounding shows up twice: once in the ten-year cost of a skipped match, and once in the reason an early withdrawal costs more than the penalty it charges. Lesson 2's cushion is the reason the retirement wrapper is not where a cushion goes, and lesson 2's evidence about automation, rather than intention, is why this lesson's exercise insists on changing a setting rather than forming a resolution.

Lesson 8 takes up the other half of protecting a plan. This lesson made a plan more efficient. Insurance is about what happens when something goes wrong in a way that no amount of efficiency covers.

Go deeper

• IRS: 401(k) contribution limits and IRA contribution limits. Every figure on these pages changes annually, which is why this lesson used invented round numbers. Check the current year rather than trusting any number you remember.
• IRS: retirement topics, vesting, two pages, and the one you need before assuming the match is yours. While you are on the IRS site, the Saver's Credit is worth ten minutes: a credit of 10% to 50% of up to $2,000 of contributions for filers under an income limit, aimed squarely at lower earners and widely unclaimed.
• Vanguard, How America Saves, the annual report behind the plan statistics here. Long, free, and the fastest way to find out whether your own plan is generous or thin.
• Bogleheads wiki, "Prioritizing investments". The practitioner community's version of this lesson's order of operations, with the reasoning for each step written out and argued over. Useful precisely because it disagrees with itself in places.

Sources

[1] Internal Revenue Service, "401(k) and profit-sharing plan contribution limits"; tax year 2026 elective deferral $24,500, catch-up $8,000 at 50 and over. Checked 9 September 2026. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits . IRA limits, $7,500 for 2026 and shared across traditional and Roth IRAs: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

[2] Internal Revenue Service, "Retirement topics: vesting"; employee contributions "always 100% vested", cliff and graded schedules for employer contributions. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-vesting

[3] Vanguard, How America Saves 2025, plan-year 2024 data across approximately five million participants: match formula distribution (68% single-tier, 25% multitier), most frequent formula 50% on first 6% of pay at 13% of plans, average promised match 4.6% of pay and median 4.0%, average deferral to maximise the match 6.5% of pay, immediate vesting in nearly half of plans, 4% of plans with no employer contribution. https://corporate.vanguard.com/content/dam/corp/research/pdf/how_america_saves_report_2025.pdf

[4] Internal Revenue Service, Topic 558, "Additional tax on early distributions from retirement plans"; 10% additional tax before age 59 and a half, and the list of exceptions. https://www.irs.gov/taxtopics/tc558 . Roth IRA ordering rules and required minimum distributions (traditional IRA RMDs begin at 73; a Roth IRA has none for the original owner) are in Publication 590-B: https://www.irs.gov/publications/p590b

[5] US Bureau of Labor Statistics, Employee Benefits in the United States, March 2025, Table 1; private industry retirement benefits access 72%, participation 53%, take-up 73%; lowest 25% wage category 49% and 23%; highest 10% 93% and 83%. https://www.bls.gov/news.release/ebs2.t01.htm

[6] Economic Policy Institute, "The State of American Retirement", the standard statement of the position that the shift from defined benefit plans to 401(k)s failed most workers. The page returned an HTTP 403 to automated retrieval on 9 September 2026, so this course names the position and does not quote figures from a source it was unable to open. https://www.epi.org/publication/retirement-in-america/

[7] James J. Choi, David Laibson and Brigitte C. Madrian, "$100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans", NBER Working Paper 11554 (2005), published in Review of Economics and Statistics 93(3), 2011; 20% to 60% contributing below the match threshold across seven companies, 36% of match-eligible employees over 59 and a half forgoing an average 1.6% of pay ($507), and a survey intervention raising contributions by a statistically insignificant 0.67% of income. https://www.nber.org/papers/w11554

[8] Center for Retirement Research at Boston College, "401(k) saving harder at lower incomes"; contribution rates of 6.11% of pay for high earners against 2.8% for the bottom half, and greater dependence on employer contributions among lower earners. https://crr.bc.edu/401k-saving-harder-at-lower-incomes/

[9] Center for Retirement Research at Boston College, "Don't bring back traditional private sector defined benefit plans" and "Closing the coverage gap"; about half of private-sector workers not participating at a given moment, the back-loading of DB benefits, and roughly a third of workers aged 45 to 49 having ten years or more with one employer. https://crr.bc.edu/dont-bring-back-traditional-private-sector-defined-benefit-plans/

All dollar figures in the worked examples are invented round numbers chosen to make the arithmetic visible, and all of them are federal-tax illustrations for the United States. Contribution limits, bracket thresholds and credit phase-outs change every year; check source [1] rather than any figure printed here.