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What Suits Your Business Best, CalSavers or 401(k)?

Retirement planning is a critical aspect of financial security, and there are various options available to help individuals save for their golden years. Two popular choices in the United States are the CalSavers Retirement Program and the 401(k) retirement plan. In this article, we will compare these two retirement options to help you decide which one might be right for you.

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CalSavers Retirement Program

The CalSavers Retirement Program is a state-sponsored retirement savings program offered in California. It was designed to help employees, especially those working for smaller companies that don't offer traditional retirement plans like 401(k)s, save for retirement. Here are some key features of the CalSavers program:

  1. Automatic Enrollment: One of the standout features of CalSavers is that eligible employees are automatically enrolled in the program unless they opt out. This "opt-out" system encourages more people to start saving for retirement.

  2. Accessibility: CalSavers is accessible to all eligible California employees, regardless of the size of their employer. This makes it particularly attractive for those who work for small businesses that may not offer retirement benefits.

  3. Low Fees: The program offers a range of investment options with relatively low fees, which can help maximize your retirement savings over time.

  4. Portability: Participants can take their CalSavers accounts with them when they change jobs, providing flexibility and continuity in their retirement savings.

  5. Roth and Traditional IRAs: CalSavers offers both Roth and Traditional IRA options, allowing participants to choose the tax treatment that best suits their financial situation.

401(k) Retirement Plan

The 401(k) retirement plan is a widely recognized and utilized retirement savings option in the United States. It is typically offered by employers, and employees can contribute a portion of their salary to the plan. Here are some key features of 401(k) plans:

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  1. Employer Contributions: Many employers offer matching contributions to 401(k) plans, effectively doubling an employee's savings. This is a significant advantage over CalSavers.

  2. Higher Contribution Limits: 401(k) plans generally have higher annual contribution limits compared to CalSavers, allowing individuals to save more for retirement each year.

  3. Tax Benefits: Contributions to a 401(k) are made on a pre-tax basis, reducing your taxable income. This can lead to substantial tax savings in the short term.

  4. Investment Options: 401(k) plans often provide a more comprehensive range of investment options than CalSavers, allowing participants to tailor their investments to their risk tolerance and financial goals.

  5. Early Withdrawals: While not recommended, 401(k) plans typically allow for penalty-free withdrawals for specific purposes like buying a home or paying for education.


Now, let's compare CalSavers and 401(k) plans based on various factors:

  1. Accessibility: CalSavers is more accessible to individuals working for small businesses that do not offer retirement plans. 401(k) programs are typically provided by larger employers.

  2. Employer Contributions: 401(k) plans often provide matching contributions, a significant advantage over CalSavers.

  3. Contribution Limits: 401(k) plans have higher annual contribution limits, allowing for more significant savings potential.

  4. Tax Benefits: 401(k) plans offer immediate tax benefits due to pre-tax contributions, while CalSavers offers tax advantages in the long term for Roth IRAs.

  5. Investment Options: 401(k) plans typically provide a more comprehensive range of investment options, giving participants more control over their investments.

  6. Portability: Both CalSavers and 401(k) plans offer portability when changing jobs.


Choosing between the CalSavers Retirement Program and a 401(k) retirement plan depends on your specific financial situation and goals. If you work for a small business without a retirement plan and want a simple, automatic savings option, CalSavers may be a good fit. On the other hand, if your employer offers a 401(k) plan with matching contributions and you can take advantage of the higher contribution limits, it might be a more powerful tool for building your retirement nest egg. Ultimately, it's essential to consider your circumstances and consult with a financial advisor to make the best choice for your retirement planning needs.

So, what do you think? Does Calsavers suit your company best? Contact a TPG Specialist for a free consultation and learn more about the program or any other options that suit you best. Our specialists will be ready to help you in your journey, just call 909.466.7876 today!

Also, read our short and practical article titled "A Guide to Calsavers - California’s Retirement Savings Program" as this will help you have a strong foundation of knowledge when deciding on your business' retirement savings program.