One of the great things about workplace retirement plans is that the employer has already created the plan, minimizing the research you have to do. Understanding the plan — such as whether contributions are made by the employee, the employer, or both — is still your responsibility to be sure you get the most out of it.

Defined Benefit Versus Defined Contribution

Employer retirement plans are either defined-benefit or defined-contribution plans. If your plan has a defined benefit, you'll be told that as long as you work for the company for a certain time, you'll receive a regular defined income — benefit — upon retirement. These are the old-fashioned pensions that some, though increasingly fewer, employers offer. Employees do not contribute to these plans and employers can change them if they need to, even affecting retirees.

In recent decades, defined-contribution plans have become much more popular; they're less expensive to employers and fully portable for employees who change jobs. You have a defined-contribution plan if you're told that you can contribute a specified amount to the plan each year. Your future benefit from the plan is dependent on how much you contribute and how well the investments perform. The employer may or may not contribute to the plan, and some plans allow contributions by employers and not from employees.

Defined-contribution plans — such as the alphabet soup of 401(k)s, 403(b)s, 401(a)s, and 457s — can be transferred into personal retirement plans.

In 2008, the most common employer plan, the 401(k), allowed employees to contribute up to $16,000 per year from their paycheck. Employees over age 50 are allowed an additional $5,000 “catchup” amount, for a total of $21,000.

Auto Enroll — Things to Check in Your Plan

Many defined-contribution plans are “qualified,” meaning they must follow certain rules, including making them accessible and fair to all the employees, regardless of compensation. To encourage participation from all employees, many employers have started an automatic enrollment program. Auto-enrollment means that instead of having to remember to enroll in the plan, you are already enrolled and have to remember to unenroll. Inertia keeps most people in the plan.

If you have been auto-enrolled, you still need to make sure that the amount you're contributing is enough to meet your retirement goals and that the investment choice in the plan is appropriate. The default for many auto-enroll plans is too low for most employees' retirement savings needs. Some plans are set to start at 3 percent or 5 percent of pay when the employee should be saving 10 percent or more. Some plans set the auto-enroll investment default to a type of account that is too conservative.

Early Access Options

Check your plan document to see what your options are if you need to withdraw money before age 59½, or while you're still working for the employer. Some employers will allow loans against the plan balance or hardship withdrawals. Loans are not taxable unless you take longer than five years to repay the balance or if you leave the employer. Hardship withdrawals are taxable as income and have a 10 percent penalty if you're under age 59½.