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Best Retirement Plans of 2024: Choose the Right Account for You

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Table of Contents

Defined contribution plans

Individual retirement accounts (iras), retirement plans for small-business owners and self-employed people.

Gone are the days when workers could count on an employee pension plan and Social Security to cover their costs during those golden years. Today, pensions are a rarity and Social Security isn’t a slam-dunk for future generations.

So what's the best retirement plan out there now? Well, it depends on how you want to invest and what's available to you. If you have access to a retirement plan at work, such as a 401(k) , read more about defined contribution plans.

If you’ve maxed out your 401(k) or you don’t have a retirement plan at work, jump to our section on the pros and cons of IRAs, including traditional and Roth.

If you're self-employed or own a small business, read about retirement accounts designed specifically for you, including the SEP IRA, solo 401(k), SIMPLE IRA and profit-sharing plans.

» MORE: If you want someone to help you, read our guide on how to choose a financial advisor .

There are two main types of employer-sponsored retirement plans:

Defined benefit plans: In years past, some companies guaranteed workers a set benefit in retirement, a pension plan. The company kicked money into a single retirement pool, and the pension plan invested it. These plans are rare now. Still, you might find an employer that makes annual contributions to a retirement plan based on a similar formula but without any guarantee of the benefit provided in retirement.

Defined contribution plans: These are now the most common type of workplace retirement plan, and that's where we will focus more of our attention. Employers set up these plans, such as 401(k)s and 403(b)s, to enable employees to contribute to an individual account within the company plan — typically via payroll deduction. If you come across the words “company match” in your employee benefits paperwork, that means you’ve got access to some free money: the company contributes to your account based on your personal contribution level (for example, a dollar-for-dollar or 50-cents-on-the-dollar match, up to, say, 6%).

» Crunch the numbers with our 401(k) calculator

Main advantages of defined contribution plans:

They're relatively easy to set up and maintain. Most employers offer an automatic payroll deduction option for deposits into the plan, and the retirement plan administrator (a separate financial institution) handles statements, disclosures and updates.

Your employer might match a portion of your contribution.

You can contribute more per year to a 401(k) than you can to an individual retirement account (IRA).

Employee contributions to traditional 401(k) plans reduce your taxable income for the year. You'll owe taxes on the withdrawals you make in retirement. Roth 401(k) contributions don't offer any immediate tax break because contributions are made with after-tax money. However, qualified withdrawals from Roth 401(k)s are tax-free in retirement.

The Roth 401(k) has no income restrictions, unlike the Roth IRA.

company retirement plan types

Main disadvantages of defined contribution plans:

Investment choices within employer-sponsored retirement plans are often limited to certain funds, leaving you with fewer options than in an IRA.

Management and administrative fees can be high and erode your investment returns over time.

New employees might have a waiting period before they can contribute to a plan.

Employer match contributions might be subject to a vesting schedule, in which money becomes the property of employees only after they have worked for the company for a certain amount of time.

» Learn more: How to decide if it’s better to invest in an IRA or a 401(k) .

5 types of employer-sponsored retirement plans

Sources: IRS.gov , TSP.gov , 403bwise.com .

The IRA is one of the most common retirement plans. An individual can set up an IRA at a financial institution, such as a bank or brokerage firm, to hold investments — stocks, mutual funds, bonds and cash — earmarked for retirement.

The IRS limits how much an individual can contribute to an IRA each year, and depending on the type of IRA, decides how the funds are taxed — or protected from taxation — when a participant makes deposits and withdrawals.

Main advantages of IRAs

They put you in the driver’s seat. You choose the bank or brokerage and make all the investment decisions, or hire someone to make them for you.

Depending on the type of IRA you choose — Roth or traditional — and based on your eligibility, you can decide how and when you get a tax break.

IRAs usually provide a much wider range of investment choices than workplace retirement plans do.

If you qualify for both a Roth and a traditional IRA in the same year, you can contribute to both. Your total contributions must remain below the combined IRA contribution limit. But the "twofer" does get you some tax diversification in your retirement portfolio.

Main disadvantages of IRAs

Another consideration in the IRA vs. 401(k) debate , is that IRAs have lower annual contribution limits than most workplace retirement accounts:

In 2024, the maximum amount you can put in an IRA is $7,000. If you're 50 or older, you can contribute an additional $1,000 as a catch-up contribution. You can contribute to an IRA for 2024 through the April tax filing deadline in 2025.

The annual maximum for 401(k)s, on the other hand, is $23,000 (or $30,500 if 50-plus) in 2024.

Roth IRA contribution limits are based on your modified adjusted gross income. The amount you're allowed to contribute begins to decrease once your income hits $146,000 (single taxpayers) or $230,000 (married filing jointly taxpayers) in 2024.

With a traditional IRA, anyone can contribute, no matter their income. But your ability to deduct your contributions may be limited if you (or your spouse) have a retirement plan at work.

Choosing between a Roth and a traditional IRA requires you to guess what your tax situation will be when you start drawing from the account. For some, the immediate tax break of the traditional IRA might make that account more appealing; for others, the prospect of tax-free income in retirement makes the Roth the clear winner. Get the details in our Roth vs. traditional IRA comparison .

» MORE: See the traditional IRA income and contribution limits

According to a March 2023 Bureau of Labor Statistics report, 73% of workers have access to a workplace retirement plan. At companies with fewer than 100 workers, about 59% of employees have access to a retirement savings plan [0] Bureau of Labor Statistics . Table 1. Retirement benefits: Access, participation, and take-up rates . Accessed May 6, 2024. View all sources .

If you work at or run a small company or are self-employed, you might have a different set of retirement plans at your disposal. Some are IRA-based, while others are essentially single-serving-sized 401(k) plans. And then there are profit-sharing plans, which are a type of defined contribution plan.

Main advantages of plans for self-employed people:

Plans for contractors, self-employed people and small-business owners have higher contribution limits than most employer plans and IRAs.

These plans often offer more investment choices than employer-sponsored plans, such as 401(k)s.

Many of these plans are easy to set up and therefore not much of a burden on the small-business owner.

You might be able to set up your account at a financial institution you already use.

If you're self-employed, you can give yourself a generous profit-sharing contribution, plus make your elective deferral — with catch-up — as the employee.

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Main disadvantages of plans for self-employed people:

Employer contributions might be completely discretionary, putting more of the savings burden on employees/plan participants.

Setup and administrative duties for more complicated plans fall on the employer — which might be you.

Some plans have narrower parameters for allowable early withdrawals than traditional IRAs and employer-sponsored retirement plans.

Loans from some plans must meet certain requirements and require the participant to apply.

For self-employed people, the profit-sharing cap boils down to about 20% of net profits because of Federal Insurance Contribution Act taxes due on net profits.

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  • Retirement Planning

6 Types of Retirement Plans You Should Know About

Each Type Comes With Its Own Restrictions and Benefits

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Learning how to plan for retirement doesn't have to feel overwhelming. The various retirement plans available are easier to understand than you might think, although each is subject to its own limitations. Some of these limitations depend on your modified adjusted gross income, while others involve a cap on the amount of money you can contribute yearly.

Tax treatment of withdrawals—and the age at which you can and must take withdrawals without penalty—can vary among types of plans as well. A comparison can help you identify which is best for you. 

401(k) Plans

A 401(k) plan is a workplace retirement account that's offered as an employee savings plan benefit . This account allows you to contribute a portion of your pre-tax paycheck to tax-deferred investments. That reduces the amount of income you must pay taxes on that year. For example, if you were to earn $75,000 and contribute $5,000 to your 401(k), you'd only be taxed on $70,000.

Investment gains grow tax-deferred until you withdraw the money in retirement. If you withdraw funds from the plan before age 59 1/2, however, you could pay a  10% penalty , and the withdrawal would be subject to federal and state income taxes. Some plans allow 401(k) loans, however, if you find yourself in a cash emergency.

Some employers match their employees' contributions to a 401(k), typically up to 6%. However, you might not be fully "vested" in your plan for a number of years. That means you wouldn't be able to take your employer's contributions with you if you were to leave the company before the prescribed period of time had elapsed. Your own contributions to the plan are always yours, however. 

If you're not contributing up to the company match, you could be ignoring a significant employee benefit. That match is effectively free money. Employers who offer these plans are often willing to let you make contributions through automatic payroll deductions, which can make saving easier.

Investment choices for these types of plans are often limited, and management and administrative fees can be high. The IRS imposes contribution limits per year, although limits for 401(k) plans are more generous than those for other plans: $20,500 in 2022 (up from $19,500 in 2021). This increases to $26,000 if you're 50 or older and take advantage of the allowed $6,500 catch-up contribution.

Variations of this type of account include the  403(b) , a similar retirement plan offered to educators (e.g. in public schools), clergy, and workers at 501(c)-3 tax-exempt organizations; and  457(b) plans , which are offered to state or local government employees,

Individual Retirement Accounts (IRAs)

An IRA is a tax-favored investment account. You can use the account to invest in stocks, bonds, mutual funds, ETFs, and other types of investments after you place money into it, and you make the investment decisions yourself unless you want to hire someone else to do so for you. You might consider investing in a traditional IRA if your employer doesn't offer a retirement plan or if you've maxed out your 401(k) contributions for the year.

You can contribute up to $6,000 in 2022. This increases to $7,000 if you're age 50 or older. This limit is unchanged from 2021 limits. You'll pay no taxes annually on investment gains, which helps them to grow more quickly.

Many taxpayers can deduct their IRA contributions on their income tax returns if they don't also have a 401(k) retirement account, which reduces their taxable income for that year. Some restrictions exist based on income.  You pay income taxes on the money you contributed and on gains when the money is withdrawn in retirement.  

You can buy and sell investments within the IRA, but if you try to take money out before you reach age 59 1/2, that is known as an "early distribution," and you'll probably have to pay a 10% penalty fee, just as you would with a 401(k). You'll also be subject to federal and state and income taxes on the withdrawal. 

Unlike a traditional IRA, Roth IRA contributions are made with after-tax dollars, but any money generated within the Roth is never taxed again.

You can withdraw contributions you've made to a Roth IRA before retirement age without penalty, provided five years have passed since your first contribution. You're not currently required to begin taking withdrawals at age 72, as you are with traditional IRAs, 401(k)s, and other retirement savings plans.  

Putting money in a Roth is a great place to invest extra cash if you're just starting out, and you think your income will grow. You can even contribute to both an IRA and a Roth IRA, but your total contributions to both plans can't exceed the $6,000 contribution limit for the year or $7,000 if you're age 50 or older.

Roth 401(k)

A Roth 401(k) combines features of the Roth IRA and a 401(k). It's a type of account offered through employers, introduced in 2006. As with a Roth IRA, contributions come from your after-tax paycheck rather than your pre-tax salary. Contributions and earnings in a Roth are never taxed again if you remain in the plan for at least five years.

The best part about a Roth 401(k) is that there is no income limit as with a Roth IRA. The annual contributions are the same as a traditional 401(k), too—just with after-tax dollars. Withdrawals are the same as with a Roth IRA as well, but the distribution rules match those of a traditional 401(k).

The Savings Incentive Match for Employees (SIMPLE) IRA is a retirement plan that small businesses with up to 100 employees can offer. It works very much like a 401(k).

Contributions are made with pre-tax paycheck withdrawals, and the money grows tax-deferred until retirement.

Early distributions can result in a hefty penalty, however. Unless you qualify for an exception, you’ll have to pay an additional 10% tax on the amount you withdraw from your SIMPLE IRA (similar to Traditional IRAs and 401(k) plans). If you make the withdrawal within two years from when you first participated in the SIMPLE IRA plan, this additional tax increases to 25%. You can't borrow from a SIMPLE IRA, either, the way you can from a 401(k). 

A Simplified Employee Pension (SEP) IRA allows you to contribute a portion of your income to your own retirement account if you're self-employed and have no employees. You can fully deduct these contributions from your taxable income.

The maximum annual contribution limits are higher than most other tax-favored retirement accounts: $61,000 for 2022 (up from $58,000 in 2021), or 25% of income— whichever is less.

Frequently Asked Questions (FAQs)

How much should i be saving for retirement.

The amount of money you should be saving for retirement depends on many factors, including your current cost of living and salary. If you're looking for a good retirement savings goal, shoot for 15% of your annual income, including employer contributions.

Can I have more than one IRA account?

You can have more than one IRA account , but that doesn't change the amount you are allowed to contribute to them each year, which is $6,000 if you are under 50 and $7,000 if you are 50 or older.

Do I have to start taking money out of an IRA at a specific time?

There is no required minimum distribution for a Roth IRA, but for a traditional IRA, you must start taking money out of the account by April 1 following the year you turn age 72 and by December 31 each year after that. That age is lowered to 70 1/2 if you reached it before January 1, 2020.

U.S. Securities and Exchange Commission. " 401(k) Plan ."

Internal Revenue Service. " Retirement Topics - Exceptions to Tax On Early Distributions ."

Morgan Stanley. " You Work Hard, Make Your 401(k) Plan Work Harder ."

Internal Revenue Service. " Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits ."

Internal Revenue Service. " Retirement Topics - IRA Contribution Limits ."

Internal Revenue Service. " Income Ranges for Determining IRA Eligibility Change for 2021 ."

Internal Revenue Service. " Traditional IRAs ."

Internal Revenue Service. " IRA FAQs - Distributions (Withdrawals) ."

Internal Revenue Service. " Publication 590-B (2019): Distributions From Individual Retirement Arrangements (IRAs) ," Page 28.

Internal Revenue Service. " Roth Comparison Chart ."

Internal Revenue Service. " SIMPLE IRA Plan FAQs - Establishing a SIMPLE IRA Plan ."

Internal Revenue Service. " SIMPLE IRA Withdrawal and Transfer Rules ."

Internal Revenue Service. " SEP Contribution Limits (Including Grandfathered SARSEPs) ."

T. Rowe Price. " You’re Age 35, 50, or 60: How Much Should You Have Saved for Retirement by Now? "

Internal Revenue Service. " Traditional and Roth IRAs ."

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9 best retirement plans in May 2024

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It can be easy to let planning for retirement slip by, while you’re focusing on your career or raising children. In fact, 56 percent of working Americans say they’re behind on retirement savings, according to a 2023 Bankrate survey . So it’s important to know what options you have and their benefits, when it comes to creating a financially secure future.

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On This Page

The 9 best retirement plans

Other accounts for retirement saving, key plan benefits to consider, which retirement plan is best for you, how to get started, what is the best investment strategy for retirement.

  • Related content
  • Defined contribution plans
  • Solo 401(k) plan
  • Traditional pensions
  • Guaranteed income annuities (GIAs)
  • The Federal Thrift Savings Plan
  • Cash-balance plans
  • Cash-value life insurance plan
  • Nonqualified deferred compensation plans (NQDC)

1. Defined contribution plans

Since their introduction in the early 1980s, defined contribution (DC) plans , which include 401(k)s, have all but taken over the retirement marketplace. Roughly 86 percent of Fortune 500 companies offered only DC plans rather than traditional pensions in 2019, according to a study from insurance broker Willis Towers Watson.

The 401(k) plan is the most ubiquitous DC plan among employers of all sizes, while the similarly structured 403(b) plan is offered to employees of public schools and certain tax-exempt organizations, and the 457(b) plan is most commonly available to state and local governments.

The employee's contribution limit for each plan is $23,000 in 2024 ($30,500 for those aged 50 and over).

Many DC plans offer a Roth version, such as the Roth 401(k) in which you use after-tax dollars to contribute, but you can take the money out tax-free at retirement.

"The Roth election makes sense if you expect your tax rate to be higher at retirement than it is at the time you're making the contribution," says David Littell, professor emeritus of taxation at The American College of Financial Services.

401(k) plans

A 401(k) plan is a tax-advantaged plan that offers a way to save for retirement. With a traditional 401(k) an employee contributes to the plan with pre-tax wages, meaning contributions are not considered taxable income. The 401(k) plan allows these contributions to grow tax-free until they’re withdrawn at retirement. At retirement, distributions create a taxable gain, though withdrawals before age 59 ½ may be subject to taxes and additional penalties.

With a Roth 401(k) an employee contributes after-tax dollars and gains are not taxed as long as they are withdrawn after age 59 1/2.

A 401(k) plan can be an easy way to save for retirement, because you can schedule the money to come out of your paycheck and be invested automatically. The money can be invested in a number of high-return investments such as stocks, and you won’t have to pay tax on the gains until you withdraw the funds (or ever in a Roth 401(k)). In addition, many employers offer you a match on contributions, giving you free money – and an automatic gain – just for saving.

One key disadvantage of 401(k) plans is that you may have to pay a penalty for accessing the money if you need it for an emergency. While many plans do allow you to take loans from your funds for qualified reasons, it’s not a guarantee that your employer’s plan will do that. Your investments are limited to the funds provided in your employer’s 401(k) program, so you may not be able to invest in what you want to.

What it means to you

A 401(k) plan is one of the best ways to save for retirement, and if you can get bonus “match” money from your employer, you can save even more quickly.

403(b) plans

A 403(b) plan is much the same as a 401(k) plan, but it’s offered by public schools, charities and some churches, among others. The employee contributes pre-tax money to the plan, so contributions are not considered taxable income, and these funds can grow tax-free until retirement. At retirement, withdrawals are treated as ordinary income, and distributions before age 59 ½ may create additional taxes and penalties.

Similar to the Roth 401(k), a Roth 403(b) allows you to save after-tax funds and withdraw them tax-free in retirement.

A 403(b) is an effective and popular way to save for retirement, and you can schedule the money to be automatically deducted from your paycheck, helping you to save more effectively. The money can be invested in a number of investments, including annuities or high-return assets such as stock funds, and you won’t have to pay taxes until you withdraw the money. Some employers may also offer you a matching contribution if you save money in a 403(b).

Like the 401(k), the money in a 403(b) plan can be difficult to access unless you have a qualified emergency. While you may still be able to access the money without an emergency, it may cost you additional penalties and taxes, though you can also take a loan from your 403(b). Another downside: You may not be able to invest in what you want, since your options are limited to the plan’s investment choices.

What it means to you: A 403(b) plan is one of the best ways for workers in certain sectors to save for retirement, especially if they can receive any matching funds. This 403(b) calculator can help you determine how much you can save for retirement.

457(b) plans

A 457(b) plan is similar to a 401(k), but it’s available only for employees of state and local governments and some tax-exempt organizations. In this tax-advantaged plan, an employee can contribute to the plan with pre-tax wages, meaning the income is not taxed. The 457(b) allows contributions to grow tax-free until retirement, and when the employee withdraws money, it becomes taxable.

A 457(b) plan can be an effective way to save for retirement, because of its tax advantages. The plan offers some special catch-up savings provisions for older workers that other plans don’t offer, as well. The 457(b) is considered a supplemental savings plan, and so withdrawals before age 59 ½ are not subject to the 10 percent penalty that 403(b) plans are.

The typical 457(b) plan does not offer an employer match, which makes it much less attractive than a 401(k) plan. Also, it’s even tougher to take an emergency withdrawal from a 457(b) plan than from a 401(k).

A 457(b) plan can be a good retirement plan, but it does offer some drawbacks compared to other defined contributions plans. And by offering withdrawals before the typical retirement age of 59 ½ without an additional penalty, the 457(b) can be beneficial for retired public servants who may have a physical disability and need access to their money.

2. IRA plans

An IRA is a valuable retirement plan created by the U.S. government to help workers save for retirement. Individuals can contribute up to $7,000 to an account in 2024, and workers over age 50 can contribute up to $8,000.

There are many kinds of IRAs, including a traditional IRA, Roth IRA, spousal IRA, rollover IRA, SEP IRA and SIMPLE IRA. Here’s what each is and how they differ from one another.

Traditional IRA

A traditional IRA is a tax-advantaged plan that allows you significant tax breaks while you save for retirement. Anyone who earns money by working can contribute to the plan with pre-tax dollars, meaning any contributions are not taxable income. The IRA allows these contributions to grow tax-free until the account holder withdraws them at retirement and they become taxable. Earlier withdrawals may leave the employee subject to additional taxes and penalties.

A traditional IRA is a very popular account to invest for retirement, because it offers some valuable tax benefits, and it also allows you to purchase an almost-limitless number of investments – stocks, bonds, CDs, real estate and still other things. Perhaps the biggest benefit, though, is that you won’t owe any tax until you withdraw the money at retirement.

If you need your money from a traditional IRA, it can be costly to remove it because of taxes and additional penalties. And an IRA requires you to invest the money yourself, whether that’s in a bank or in stocks or bonds or something else entirely. You’ll have to decide where and how you’ll invest the money, even if that’s only to ask an adviser to invest it.

What it means to you: A traditional IRA is one of the best retirement plans around, though if you can get a 401(k) plan with a matching contribution, that’s somewhat better. But if your employer doesn’t offer a defined contribution plan, then a traditional IRA is available to you instead — though the tax-deductibility of contributions is eliminated at higher income levels.

A Roth IRA is a newer take on a traditional IRA, and it offers substantial tax benefits. Contributions to a Roth IRA are made with after-tax money, meaning you’ve paid taxes on money that goes into the account. In exchange, you won’t have to pay tax on any contributions and earnings that come out of the account at retirement.

The Roth IRA offers several advantages, including the special ability to avoid taxes on all money taken out of the account in retirement, at age 59 ½ or later. The Roth IRA also provides lots of flexibility, because you can often take out contributions – not earnings – at any time without taxes or penalties. This flexibility actually makes the Roth IRA a great retirement plan.

As with a traditional IRA, you’ll have full control over the investments made in a Roth IRA. And that means you’ll need to decide how to invest the money or have someone do that job for you. There are income limits for contributing to a Roth IRA, though there’s a back-door way to get money into one.

A Roth IRA is an excellent choice for its huge tax advantages, and it’s an excellent choice if you’re able to grow your earnings for retirement and keep the taxman from touching it again.

Spousal IRA

IRAs are normally reserved for workers who have earned income, but the spousal IRA allows the spouse of a worker with earned income to fund an IRA as well. However, the working spouse’s taxable income must be more than the contributions made to any IRAs, and the spousal IRA can either be a traditional IRA or a Roth IRA.

The biggest positive of the spousal IRA is that it allows a non-working spouse to take advantage of an IRA’s various benefits, either the traditional or Roth version.

There’s not a particular downside to a spousal IRA, though like all IRAs, you’ll have to decide how to invest the money.

The spousal IRA allows you to take care of your spouse’s retirement planning without forcing your partner to have earned income, as would usually be the case. That may allow your spouse to stay home or take care of other family needs.

Rollover IRA

A rollover IRA is created when you move a retirement account such as a 401(k) or IRA to a new IRA account. You “roll” the money from one account to the rollover IRA, and can still take advantage of the tax benefits of an IRA. You can establish a rollover IRA at any institution that allows you to do so, and the rollover IRA can be either a traditional IRA or a Roth IRA. There’s no limit to the amount of money that can be transferred into a rollover IRA.

A rollover IRA also allows you to convert the type of retirement account, from a traditional 401(k) to a Roth IRA. These types of transfers can create tax liabilities , however, so it’s important to understand the consequences before you decide how to proceed.

A rollover IRA allows you to continue to take advantage of attractive tax benefits, if you decide to leave a former employer’s 401(k) plan for whatever reason. If you simply want to change IRA providers for an existing IRA, you can transfer your account to a new provider. As in all IRAs, you can buy a wide variety of investments.

Like all IRAs, you’ll need to decide how to invest the money, and that may cause problems for some people. You should pay special attention to any tax consequences for rolling over your money, because they can be substantial. But this is generally only an issue if you’re converting your account type from a traditional to a Roth version.

A rollover IRA is a convenient way to move from a 401(k) to an IRA.

The SEP IRA is set up like a traditional IRA, but for small business owners and their employees. Only the employer can contribute to this plan, and contributions go into a SEP IRA for each employee rather than a trust fund. Self-employed individuals can also set up a SEP IRA.

Contribution limits in 2024 are 25 percent of compensation or $69,000, whichever is less. Figuring out contribution limits for self-employed individuals is a bit more complicated .

"It's very similar to a profit-sharing plan," says Littell, because contributions can be made at the discretion of the employer.

For employees, this is a freebie retirement account. For self-employed individuals, the higher contribution limits make them much more attractive than a regular IRA.

There's no certainty about how much employees will accumulate in this plan. Also, the money is more easily accessible. This can be viewed as more good than bad, but Littell views it as bad.

Account holders are still tasked with making investment decisions. Resist the temptation to break open the account early. If you tap the money before age 59 ½, you'll likely have to pay a 10 percent penalty on top of income tax.

With 401(k) plans, employers have to pass several nondiscrimination tests each year to make sure that highly compensated workers aren't contributing too much to the plan relative to the rank-and-file.

The SIMPLE IRA bypasses those requirements because the same benefits are provided to all employees. The employer has a choice of whether to contribute a 3 percent match or make a 2 percent non-elective contribution even if the employee saves nothing in his or her own SIMPLE IRA.

Littell says most SIMPLE IRAs are designed to provide a match, so they provide an opportunity for workers to make pre-tax salary deferrals and receive a matching contribution. To the employee, this plan doesn't look much different from a 401(k) plan.

The employee contribution has a limit of $16,000 for 2024, compared to $23,000 for other defined contribution plans. But most people don't contribute that much anyway, says Littell.

As with other DC plans, employees have the same decisions to make: how much to contribute and how to invest the money. Some entrepreneurs prefer the SIMPLE IRA to the SEP IRA – here are the key differences .

3. Solo 401(k) plan

Alternatively known as a Solo-k, Uni-k and One-participant k, the solo 401(k) plan is designed for a business owner and his or her spouse.

Because the business owner is both the employer and employee, elective deferrals of up to $23,000 can be made in 2024, plus a non-elective contribution of up to 25 percent of compensation up to a total annual contribution of $69,000 for businesses, not including catch-up contributions of $7,500 for 2024.

"If you don't have other employees, a solo is better than a SIMPLE IRA because you can contribute more to it," says Littell. "The SEP is a little easier to set up and to terminate." However, if you want to set up your plan as a Roth, you can't do it in a SEP, but you can with a Solo-k.

It's a bit more complicated to set up, and once assets exceed $250,000, you'll have to file an annual report on Form 5500-SE.

If you have plans to expand and hire employees, this plan won't work . Once you hire other workers, the IRS mandates that they must be included in the plan if they meet eligibility requirements, and the plan will be subject to non-discrimination testing. The solo 401(k) compares favorably to the popular SEP IRA, too .

4. Traditional pensions

Traditional pensions are a type of defined benefit (DB) plan, and they are one of the easiest to manage because so little is required of you as an employee.

Pensions are fully funded by employers and provide a fixed monthly benefit to workers at retirement. But DB plans are on the endangered species list because fewer companies are offering them. Just 14 percent of Fortune 500 companies enticed new workers with pension plans in 2019, down from 59 percent in 1998, according to data from Willis Towers Watson.

Why? DB plans require the employer to make good on an expensive promise to fund a hefty sum for your retirement. Pensions, which are payable for life, usually replace a percentage of your pay based on your tenure and salary.

A common formula is 1.5 percent of final average compensation multiplied by years of service, according to Littell. A worker with an average pay of $50,000 over a 25-year career, for example, would receive an annual pension payout of $18,750, or $1,562.50 a month.

This benefit addresses longevity risk – or the risk of running out of money before you die.

"If you understand that your company is providing a replacement of 30 percent to 40 percent of your pay for the rest of your life, plus you're getting 40 percent from Social Security, this provides a strong baseline of financial security," says Littell. "Additional savings can help but are not as central to your retirement security."

Since the formula is generally tied to years of service and compensation, the benefit grows more rapidly at the end of your career. "If you were to change jobs or if the company were to terminate the plan before you hit retirement age, you can get a lot less than the benefit you originally expected," says Littell.

Since company pensions are increasingly rare and valuable, if you are fortunate enough to have one, leaving the company can be a major decision. Should you stay or should you go? It depends on the financial strength of your employer, how long you’ve been with the company and how close you are to retiring. You can also factor in your job satisfaction and whether there are better employment opportunities elsewhere.

5. Guaranteed income annuities (GIAs)

Guaranteed income annuities are generally not offered by employers, but individuals can buy these annuities to create their own pensions. You can trade a big lump sum at retirement and buy an immediate annuity to get a monthly payment for life, but most people aren't comfortable with this arrangement. More popular are deferred income annuities that are paid into over time.

For example, at age 50, you can begin making premium payments until age 65, if that's when you plan to retire. "Each time you make a payment, it bumps up your payment for life," says Littell.

You can buy these on an after-tax basis, in which case you'll owe tax only on the plan's earnings. Or you can buy it within an IRA and can get an upfront tax deduction, but the entire annuity would be taxable when you take withdrawals.

Littell himself invested in a deferred income annuity to create an income stream for life. "It's very satisfying, it felt really good building a bigger pension over time," he says.

If you're not sure when you're going to retire or even if you're going to retire, then it may not make sense. "You're also locking into a strategy that you can't get rid of," he says.

In addition, annuities are complex legal contracts, and it can be difficult to understand your rights and rewards for signing up for an annuity. You’ll want to be fully informed about what the annuity will and won’t do for you.

You'll be getting bond-like returns and you lose the possibility of getting higher returns in the stock market in exchange for the guaranteed income. Since payments are for life, you also get more payments (and a better overall return) if you live longer.

"People forget that these decisions always involve a trade-off," Littell says.

6. The Federal Thrift Savings Plan

The Thrift Savings Plan (TSP) is a lot like a 401(k) plan on steroids, and it’s available to government workers and members of the uniformed services.

Participants choose from five low-cost investment options, including a bond fund, an S&P 500 index fund, a small-cap fund and an international stock fund — plus a fund that invests in specially issued Treasury securities.

On top of that, federal workers can choose from among several lifecycle funds with different target retirement dates that invest in those core funds, making investment decisions relatively easy.

Federal employees can get a 5 percent employer contribution to the TSP, which includes a 1 percent non-elective contribution, a dollar-for-dollar match for the next 3 percent and a 50 percent match for the next 2 percent contributed.

“The formula is a bit complicated, but if you put in 5 percent, they put in 5 percent,” says Littell. “Another positive is that the investment fees are shockingly low – four-hundredths of a percentage point.” That translates to 40 cents annually per $1,000 invested – much lower than you’ll find elsewhere.

As with all defined contribution plans, there’s always uncertainty about what your account balance might be when you retire.

You still need to decide how much to contribute, how to invest, and whether to make the Roth election. However, it makes a lot of sense to contribute at least 5 percent of your salary to get the maximum employer contribution.

7. Cash-balance plans

Cash-balance plans are a type of defined benefit, or pension plan, too.

But instead of replacing a certain percentage of your income for life, you are promised a certain hypothetical account balance based on contribution credits and investment credits (e.g., annual interest). One common setup for cash-balance plans is a company contribution credit of 6 percent of pay plus a 5 percent annual investment credit, says Littell.

The investment credits are a promise and are not based on actual contribution credits. For example, let's say a 5 percent return, or investment credit, is promised. If the plan assets earn more, the employer can decrease contributions. In fact, many companies that want to shed their traditional pension plan convert to a cash-balance plan because it allows them better control over the costs of the plan.

It still provides a promised benefit, and you don't have to contribute anything to it. "There's a fair amount of certainty in how much you're going to get," says Littell. Also, if you do decide to switch jobs, your account balance is portable so you'll get whatever the account is worth on your way out the door of your old job.

If the company changes from a generous pension plan to a cash-balance plan, older workers can potentially lose out, though some companies will grandfather long-term employees into the original plan. Also, the investment credits are relatively modest, typically 4 percent or 5 percent. "It becomes a conservative part of your portfolio," says Littell.

The date you retire will impact your benefit, and working longer is more advantageous. "Retiring early can truncate your benefit," says Littell.

Also, you'll get to choose from a lump sum or an annuity form of benefit. When given the option between a $200,000 lump sum or a monthly annuity check of $1,000 for life, “too many people,” choose the lump sum when they'd be better off getting the annuity for life, says Littell.

8. Cash-value life insurance plan

Some companies offer cash-value life insurance plans as a benefit.

There are various types: whole life, variable life, universal life and variable universal life. They provide a death benefit while at the same time building cash value, which could support your retirement needs. If you withdraw the cash value, the premiums you paid – your cost basis – come out first and are not subject to tax.

"There are some similarities to the Roth tax treatment, but more complicated,” says Littell. “You don't get a deduction on the way in, but if properly designed, you can get tax-free withdrawals on the way out."

It addresses multiple risks by providing either a death benefit or a source of income. Plus, you get tax deferral on the growth of your investment.

"If you don't do it right, if the policy lapses, you end up with a big tax bill," says Littell. Like other insurance solutions, once you buy it, you are more or less locked into the strategy for the long term. Another risk is that the products don't always perform as well as the illustrations might show that they will.

These products are for wealthier people who have already maxed out all other retirement savings vehicles. If you've reached the contribution limits for your 401(k) and your IRA, then you might consider investing in this type of life insurance.

9. Nonqualified deferred compensation plans (NQDC)

Unless you're a top executive in the C-suite, you can pretty much forget about being offered an NQDC plan . There are two main types: One looks like a 401(k) plan with salary deferrals and a company match, and the other is solely funded by the employer.

The catch is that most often the latter one is not really funded. The employer puts in writing a "mere promise to pay" and may make bookkeeping entries and set aside funds, but those funds are subject to claims by creditors.

The benefit is you can save money on a tax-deferred basis, but the employer can't take a tax deduction for its contribution until you start paying income tax on withdrawals.

They don't offer as much security, because the future promise to pay relies on the solvency of the company.

"There's some risk that you won't get your payments (from an NQDC plan) if the company has financial problems," says Littell.

For executives with access to an NQDC plan in addition to a 401(k) plan, Littell's advice is to max out the 401(k) contributions first. Then if the company is financially secure, contribute to the NQDC plan if it's set up like a 401(k) with a match.

The plans above were established for the express purpose of funding retirement, but other special tax-advantaged accounts – namely, health savings accounts (HSAs) and 529 education savings plans – can also be used to fund retirement. 

HSAs were created as a way to save for healthcare expenses, but they can effectively be used as a supplemental retirement account . HSAs offer a triple tax advantage: You can contribute on a pre-tax basis, your money can grow tax-free and withdrawals are tax-free if used for qualified healthcare expenses. But when you hit age 65, any money in the account can be withdrawn and used for any purpose without a penalty, though you’ll owe taxes on the withdrawal at ordinary income rates. This feature makes the HSA function like a traditional IRA, if held to age 65.

While the 529 plan was established as a way to save for education expenses, it can now be used as a source of money to fund a Roth IRA, subject to a few important restrictions . The legal change eliminates one of the major disadvantages of the 529 plan – the potential to leave stranded money in the account – and allows it to be used for the key need of retirement saving.

While these plans are not intended to be used as primary retirement accounts, you can still use them to supplement your retirement savings if you’ve exhausted other better avenues.

Virtually all retirement plans offer a tax advantage, whether it's available upfront during the savings phase or when you're taking withdrawals. For example, traditional 401(k) contributions are made with pre-tax dollars, reducing your taxable income. Roth 401(k) plans, in contrast, are funded with after-tax dollars but withdrawals are tax-free. ( Here are other key differences between the two. )

Some retirement savings plans also include matching contributions from your employer, such as 401(k) or 403(b) plans, while others don’t. When trying to decide whether to invest in a 401(k) at work or an individual retirement account (IRA), go with the 401(k) if you get a company match – or do both if you can afford it.

If you were automatically enrolled in your company's 401(k) plan, check to make sure you’re taking full advantage of the company match if one is available.

And consider increasing your annual contribution, since many plans start you off at a paltry deferral level that is not enough to ensure retirement security. About 40 percent of 401(k) plans that offer automatic enrollment, according to Vanguard, use a default savings deferral rate of just 3 percent or less. Yet T. Rowe Price says you should “aim to save at least 15 percent of your income each year.”

If you're self-employed, you also have several retirement savings options to choose from. In addition to the plans described below for rank-and-file workers as well as entrepreneurs, you can also invest in a Roth IRA or traditional IRA , subject to certain income limits, which have smaller annual contribution limits than most other plans. You also have a few extra options not available to everyone, including the SEP IRA, the SIMPLE IRA and the solo 401(k) .

In many cases, you simply won’t have a choice of retirement plans. You’ll have to take what your employer offers, whether that’s a 401(k), a 403(b), a defined-benefit plan or something else. But you can supplement that with an IRA, which is available to anyone regardless of their employer.

Here’s a comparison of the pros and cons of a few retirement plans.

Employer-offered retirement plans

Defined-contribution plans such as the 401(k) and 403(b) offer several benefits over a defined-benefit plan such as a pension plan:

  • Portability: You can take your 401(k) or 403(b) to another employer when you change jobs or even roll it into an IRA at that point. A pension plan may stick with your employer, so if you leave the company, you may not have a plan.
  • Potential for higher returns: A 401(k) or 403(b) may offer the potential for much higher returns because it can be invested in higher-return assets such as stocks.
  • Freedom: Because of its portability, a defined-contribution plan gives you the ability to leave an employer without fear of losing retirement benefits.
  • Not reliant on your employer’s success: Receiving an adequate pension may depend a lot on the continued existence of your employer. In contrast, a defined-contribution plan does not have this risk because of its portability.

While those advantages are important, defined-benefit plans offer some pros, too:

  • Income that shouldn’t run out: One of the biggest benefits of a pension plan is that it typically pays until your death, meaning you will not outlive your income, a real risk with 401(k), 403(b) and other such plans.
  • You don’t need to manage them: Pensions don’t require much of you. You don’t have to worry about investing your money or what kind of return it’s making or whether you’re properly invested. Your employer takes care of all of that.

So those are important considerations between defined-contribution plans and defined-benefit plans. More often than not, you won’t have a choice between the two at any individual employer.

Retirement plans for self-employed or small business owners

If you’re self-employed or own a small business, you have some further options for creating your own retirement plan. Three of the most popular options are a solo 401(k), a SIMPLE IRA and a SEP IRA, and these offer a number of benefits to participants:

  • Higher contribution limits: Plans such as the solo 401(k) and SEP IRA give participants much higher contribution limits than a typical 401(k) plan.
  • The ability to profit share: These plans may allow you to contribute to the employee limit and then add in an extra helping of profits as an employer contribution.
  • Less regulation: These retirement plans typically reduce the amount of regulation required versus a standard plan, meaning it’s easier to administer them.
  • Investible in higher-return assets: These plans can be invested in higher-return assets such as stocks or stock funds.
  • Varied investment options: Unlike a typical company-administered retirement plan, these plans may allow you to invest in a wider array of assets.

So those are some of the key benefits of retirement plans for the self-employed or small business owners.

With some of these retirement plans (such as defined benefit and defined contribution plans), you’ll have access to the plan through your employer. So if your employer doesn’t offer them, you really don’t have that option at all. But if you’re self-employed (or even just running a side gig) or earn any income, then you have options to set up a retirement plan for yourself.

First, you’ll need to determine what kind of account you’ll need. If you’re not running a business, then your option is an IRA, but you’ll need to decide between a traditional and a Roth IRA .

If you do have a business – even a one-person shop – then you have a few more options, and you’ll need to come up with the best alternative for your situation.

Then you can contact a financial institution to determine if they offer the kind of plan you’re looking for. In the case of IRAs, almost all large financial institutions offer some form of IRA, and you can quickly set up an account at one of the major online brokerages .

In the case of self-employed plans, you may have to look a little more, since not all brokers have every type of plan, but high-quality brokers offer them and often charge no fee to establish one.

Many workers have both a 401(k) plan and an IRA at their disposal, so that gives them two tax-advantaged ways to save for retirement, and they should make the most of them. But it can make sense to use your account options strategically to really max out your benefits.

One of your biggest advantages is actually an employer who matches your retirement contributions up to some amount. The most important goal of saving in a 401(k) is to try and max out this employer match. It’s easy money that provides you an immediate return for saving.

For example, this employer “match” will often give you 50 to 100 percent of your contribution each year, up to some maximum, perhaps 3 to 5 percent of your salary.

To optimize your retirement accounts, experts recommend investing in both a 401(k) and an IRA in the following order:

  • Max out your 401(k) match: The 401(k) is your top choice if your employer offers any kind of match. Once you receive this maximum free money, consider investing in an IRA.
  • Max out your IRA: Turn to the IRA if you’ve maxed out your 401(k) match or if your employer doesn’t offer a 401(k) plan or a match. Experts favor the Roth IRA because of all its perks.
  • Then max out your 401(k): If you’ve maxed out your IRA and you can save more, you can turn back to your 401(k) and add more up until the maximum annual contribution.

In any case, the best strategy to secure your financial future is to top out your accounts, saving the maximum legal amounts each year. The earlier you start investing for your future, the more your money will be able to compound, and these tax advantages can help you amass money even more quickly because you won’t have the extra drag from taxes.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

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Types of Retirement Plans

The Employee Retirement Income Security Act (ERISA) covers two types of retirement plans: defined benefit plans and defined contribution plans.

A defined benefit plan promises a specified monthly benefit at retirement. The plan may state this promised benefit as an exact dollar amount, such as $100 per month at retirement. Or, more commonly, it may calculate a benefit through a plan formula that considers such factors as salary and service - for example, 1 percent of average salary for the last 5 years of employment for every year of service with an employer. The benefits in most traditional defined benefit plans are protected, within certain limitations, by federal insurance provided through the Pension Benefit Guaranty Corporation (PBGC) .

A defined contribution plan, on the other hand, does not promise a specific amount of benefits at retirement. In these plans, the employee or the employer (or both) contribute to the employee's individual account under the plan, sometimes at a set rate, such as 5 percent of earnings annually. These contributions generally are invested on the employee's behalf. The employee will ultimately receive the balance in their account, which is based on contributions plus or minus investment gains or losses. The value of the account will fluctuate due to the changes in the value of the investments. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans.

A Simplified Employee Pension Plan (SEP) is a relatively uncomplicated retirement savings vehicle. A SEP allows employees to make contributions on a tax-favored basis to individual retirement accounts (IRAs) owned by the employees. SEPs are subject to minimal reporting and disclosure requirements. Under a SEP, an employee must set up an IRA to accept the employer's contributions. Employers may no longer set up Salary Reduction SEPs. However, employers are permitted to establish SIMPLE IRA plans with salary reduction contributions. If an employer had a salary reduction SEP, the employer may continue to allow salary reduction contributions to the plan.

A Profit Sharing Plan or Stock Bonus Plan is a defined contribution plan under which the plan may provide, or the employer may determine, annually, how much will be contributed to the plan (out of profits or otherwise). The plan contains a formula for allocating to each participant a portion of each annual contribution. A profit sharing plan or stock bonus plan may include a 401(k) plan.

A 401(k) Plan is a defined contribution plan that is a cash or deferred arrangement. Employees can elect to defer receiving a portion of their salary which is instead contributed on their behalf, before taxes, to the 401(k) plan. Sometimes the employer may match these contributions. There is a dollar limit on the amount an employee may elect to defer each year. An employer must advise employees of any limits that may apply. Employees who participate in 401(k) plans assume responsibility for their retirement income by contributing part of their salary and, in many instances, by directing their own investments.

An Employee Stock Ownership Plan (ESOP) is a form of defined contribution plan in which the investments are primarily in employer stock.

A Cash Balance Plan is a defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution plan. In other words, a cash balance plan defines the promised benefit in terms of a stated account balance. In a typical cash balance plan, a participant's account is credited each year with a "pay credit" (such as 5 percent of compensation from his or her employer) and an "interest credit" (either a fixed rate or a variable rate that is linked to an index such as the one-year treasury bill rate). Increases and decreases in the value of the plan's investments do not directly affect the benefit amounts promised to participants. Thus, the investment risks and rewards on plan assets are borne solely by the employer. When a participant becomes entitled to receive benefits under a cash balance plan, the benefits that are received are defined in terms of an account balance. The benefits in most cash balance plans, as in most traditional defined benefit plans, are protected, within certain limitations, by federal insurance provided through the Pension Benefit Guaranty Corporation (PBGC) .

Web Pages on This Topic

Cash Balance Plans: Questions and Answers (PDF) - Provides answers to commonly asked questions about cash balance plans.

Consumer Information on Retirement Plans - Publications and other materials providing information about your rights as retirement plan participants under federal retirement law.

Compliance Assistance - Provides publications and other materials designed to assist employers and employee benefit plan practitioners in understanding and complying with the requirements of ERISA as it applies to the administration ofemployee pension and health benefit plans.

Choosing a Retirement Solutions for Your Small Business (PDF) - Provides information about retirement plan options for small businesses.

ERISA Filing Acceptance System (EFAST2) - EFAST2 is an all-electronic system designed by the Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation to simplify and expedite the submission, receipt, and processing of the Form 5500 and Form 5500-SF.

QDROs: The Division of Retirement Benefits through Qualified Domestic Relations Orders (PDF) - QDROs are domestic relations orders that recognize the existence of an alternate payee's right to receive benefits payable to a participant under a retirement plan. This publication provides questions and answers on QDROs.

Retirement and Health Care Coverage: Questions and Answers for Dislocated Workers (PDF) - Provides answers to commonly asked questions from dislocated workers about their retirement and health plan benefits.

SIMPLE IRA Plans for Small Businesses (PDF) - Provides information about the basic features and requirements of SIMPLE IRA plans.

SEP Retirement Plans for Small Businesses (PDF) - Describes an easy, low-cost retirement plan option for employers.

Understanding Retirement Plan Fees And Expenses (PDF) - Provides information about plan fees to help you evaluate your plan’s investment options and prospective providers.

401(k) Plan Fees Disclosure Tool - Model comparative chart for disclosures to participants of performance and fee information to help them compare plan investment options.

What You Should Know About Your Retirement Plan (PDF) - Provides information to help answer many of the most common questions about retirement plans.

Your Employer's Bankruptcy: How Will it Affect Your Employee Benefit? (PDF) - Provides information on bankruptcy's effect on retirement plans and group health plans.

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Which types of retirement savings accounts should I consider?

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What do I need to know about a 401(k) Plan?

401(k) plan.

company retirement plan types

  • Employers may offer matching contributions
  • Higher annual contribution limits
  • Tax-exempt investment growth
  • If you're over 50 you may be able to make additional catch-up contributions
  • Taxes and penalties may apply for early withdrawal if no exception applies (before you are age 59½)
  • Employers may have a "vesting" schedule before you'll fully own their matching contributions (based on years of service)
  • Funded by pre-tax dollars
  • Withdrawals taxed at income tax rate at time of withdrawal (usually during retirement)
  • Contributions reduce your taxable income for that year
  • Funded by after-tax dollars
  • Withdrawals during retirement are federal tax free 1
  • May save you more on taxes if you expect to be in a higher tax bracket during retirement

Did you know?

What do i need to know about an individual retirement account (ira).

company retirement plan types

  • Anyone with earned income can contribute to one — even if you're self-employed
  • Generally has more investment options than a 401(k)
  • You may be able to make contributions on behalf of a non-working spouse
  • Lower contribution limit than a 401(k)
  • If you're over age 50, you can make additional catch-up contributions
  • Eligibility: No income limits, but tax deductions limited by income level
  • Can be funded by: Pre-tax dollars
  • Withdrawals of deductible contributions during retirement are taxed
  • Required minimum distribution (RMD) rules mandate account holders begin withdrawing money at age 73 or you will be subject to an additional 10% tax
  • Can be converted to a Roth IRA
  • Eligibility: Based on income
  • Withdrawals during retirement are federal tax free
  • No RMD for the original account owner
  • May save you more on taxes if you expect to be in a higher tax bracket in retirement

What do I need to know about a Health Savings Account (HSA)?

company retirement plan types

  • Contributions are tax-exempt
  • Investment growth is tax-exempt
  • Withdrawals for qualified medical expenses are tax-exempt
  • Lower contribution limits than a 401(k) or IRA
  • Contributions may be made by you and/or your employer
  • Try our Retirement Selector Tool to find out which account best suits your needs
  • Connect with a Merrill advisor for help choosing accounts to save for your future
  • Discover tips to help boost your retirement savings

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  • The best retirement plans for individuals
  • Best employer-sponsored retirement plans
  • Best retirement plans for self-employed individuals and small businesses
  • Which retirement plan is best for you?
  • Why You Should Trust Us

Best Retirement Plans in May 2024

Affiliate links for the products on this page are from partners that compensate us and terms apply to offers listed (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate products and services to help you make smart decisions with your money.

Grow your nest egg with the best retirement plans in 2024 in an online brokerage account or through an employer-sponsored plan like a 401(k) or pension. Retirement savings accounts offer long-term wealth-building features like compounding, tax-advantages, and retirement-focused investment strategies. 

Best Types of Retirement Plans in 2024

The primary types of retirement accounts are:

  • Traditional IRAs : a tax-advantaged savings account that lets your funds grow tax-deferred
  • Roth IRAs : a tax-advantaged savings account of after-tax funds (money that you've already paid taxes on)
  • Spousal IRAs: spouses earning a low (or no) annual income may open a separate IRA in their spouse's name 
  • Rollover IRAs: funds moved over from a former employer 401(k) plan into an IRA
  • 401(k) plans : traditional or Roth, typically offered by for-profit employers
  • 403(b) plans : available to most non-profit employees
  • 457(b) plans: reserved for government employees
  • Thrift savings plans : reserved for government employees

Compare Retirement Plans

The best retirement plan depends on your situation. You'll probably qualify for multiple retirement savings vehicles if you have taxable income or work for an employer.

And even if you don't work, you'll still have options. You can set up most retirement accounts through employers, but you'll also be able to open and manage your retirement accounts.

Here are our top picks for the best retirement plans by Business Insider's editors in 2024. 

Robinhood Robinhood IRA

Earn up to 3% extra on every dollar you contribute to your IRA when you subscribe to Robinhood Gold

0% ($5/month for Robinhood Gold)

  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Free stock, option, ETF, and cryptocurrency trades; 0.01% APY on uninvested cash for non-Gold users and 5.00% for Gold members
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. IPO investing available
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Cash management accounts available
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Website is easy to navigate; advanced charts for all users
  • con icon Two crossed lines that form an 'X'. Lack of investing research and trading tools; can only take advantage of professional research if you're a Robinhood Gold member
  • App store rating: 4.2 iOS/4.0 Android
  • Consider it if: You want to trade crypto and invest in a wide range of stocks and ETFs.

Charles Schwab Charles Schwab IRA

Charles Schwab has no monthly service and maintenance fee

0%; robo-advice: $0 ($30 monthly fee for Schwab Intelligent Portfolios Premium)

Traditional IRAs, Roth IRAs, rollover IRAs, SEP IRAs, SIMPLE IRAs, inherited IRAs, and custodial IRAs

  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Commission-free stocks, ETFs, and options
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. No account minimums
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Variety of account types
  • con icon Two crossed lines that form an 'X'. No cryptocurrencies
  • con icon Two crossed lines that form an 'X'. Fees for certain mutual funds, futures, and other fixed income assets

Insider considers Charles Schwab to be the best online brokerage overall, as well as one of the best online brokerages for beginners. It's great for all types of investors — including active traders, passive investors, and retirement-focused individuals — in search of low costs and access to a variety of trading tools and platforms.

  • Consider it if: You're looking for access to multiple self-directed or automated retirement and investing accounts; you value retirement planning resources and mobile access.
  • App store rating: 4.8 iOS/3.8 Android
  • Awards: Investor's Business Daily recognized Charles Schwab as one of its Most Trusted Financial Companies for 2021.

SoFi SoFi Invest

Get up to $1,000 in stock when you fund a new account.

$0 ($1 to start investing); $5 fractional shares; $2,000 for margin trading

0% for active trading and automated investing

  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. No minimum to start investing
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. No account or trading fees, and low fees to own funds
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Access to Certified Financial Planners at no additional charge
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. IPOs available
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. SoFi 1% IRA match
  • con icon Two crossed lines that form an 'X'. No tax-loss harvesting, an advanced investing technique where you sell a stock or mutual fund at a loss for a tax benefit
  • con icon Two crossed lines that form an 'X'. No option for stop-loss orders when actively investing. SoFi's active investing account only uses market orders
  • con icon Two crossed lines that form an 'X'. Currently only available to US residents

SoFi Invest us a great platform for US investors who are looking for an intuitive online trading experience, an open active or automated investing account.

  • Promotion: Get up to $1,000 in stock when you fund a new account.
  • App store rating: 4.8 iOS/4.1 Android
  • Consider it if: You want an easy-to-use platform paired with rock-bottom pricing.

Lear Capital Lear Capital

Lear Capital offers several tools for investors, which include a precious metal analyzer, portfolio comparison calculator, inflation calculator, RMD estimator, historical chart center, and precious metals encyclopedia.

One-time $280 setup fee and $200 annual fee; free set-up and storage for certain users investing in limited mintage coins

  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Gold IRAs and silver IRAs available
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Free IRA set-up and storage (for qualifying purchase amounts of limited mintage coins)
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Offers precious metal analyzer, portfolio comparison calculator, inflation calculator, and more
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Mobile apps for iOS and Android devices
  • con icon Two crossed lines that form an 'X'. High set-up fees

Lear Capital offers both an IRA gold investment and silver IRA option, and you can take advantage of free IRA setup and storage

Bitcoin IRA Bitcoin IRA

2.99% one-time deposit fee ; 2.00% transaction fee; and a 0.08% security fee billed monthly

  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Bitcoin, ethereum, litecoin, and several other cryptocurrencies available
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. You can invest in one coin or a blend of multiple coins
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. Supports IRA rollovers, traditional IRAs, Roth IRAs, SEP IRAs, and 401(k)s
  • Check mark icon A check mark. It indicates a confirmation of your intended interaction. $700 million insurance available
  • con icon Two crossed lines that form an 'X'. You'll need to speak with a company representative to learn set-up fees for your account balance
  • con icon Two crossed lines that form an 'X'. High trading fees
  • Features: 24/7 trading, offline storage, and $700 million insurance
  • Better Business Bureau rating: A+
  • Awards: Earned the Mobile Web & App of the Year award for the 2022 Globee American Best in Business Awards

Retirement Plans for Individuals

One of the most appealing components of independent retirement plans like IRAs is that you can open one as long as you've got taxable (earned) income. And even if you have an employer-sponsored retirement account, you can usually set up a traditional IRA, Roth IRA, and other independent retirement accounts.

Traditional and Roth IRAs

Traditional IRAs let you save with pre-tax contributions, while Roth IRAs allow you to contribute after-tax dollars toward your retirement savings. As long as you're eligible, experts generally recommend Roth IRAs for early-career workers who expect to be in a higher tax bracket in the future when they're making withdrawals  and traditional IRAs for higher-income workers who could use a tax deduction today.

Traditional and Roth IRAs share the same contribution and catch-up contribution limits. The 2024 contribution limit is $7,000, with up to $1,000 in catch-up contributions. The biggest difference between the two is tax advantages and income limitations. The Roth IRA limits who can contribute and how much.

If you want to open one of the best Roth IRAs , single filers can only contribute the maximum amount in 2024 if their modified adjusted gross income (MAGI) is less than 146,000. You can still contribute less if you earn a little more, though. Married couples must earn less than $230,000 annually to contribute the full amount in 2024.

You can find your MAGI by calculating your gross (before tax) income and subtracting any tax deductions from that amount to get your adjusted gross income (AGI). To calculate MAGI, you'll need to add back certain allowable deductions.

Spousal IRAs

There's also an option for married couples where one spouse doesn't earn taxable income. Spousal IRAs allow both spouses to contribute to a separate IRA as long as one spouse is employed and earns taxable income. This account allows the nonworking spouse to fund their own IRA. 

In 2024, each can contribute $7,000 (or $8,000 if they are 50 or older) for up to $16,000 per year.

Rollover IRAs

The best rollover IRAs let you convert your existing employer-sponsored retirement plan into an IRA, something experts generally recommend doing when you leave a job for a few reasons — primarily because you have more control over the investment options in an IRA than in a 401(k), and also because it's easier to consolidate your accounts for record-keeping.

Many online brokerages and financial institutions offer rollover IRAs; some will even pay you to transfer your employer-sponsored plan to the IRA.

Self-directed IRAs (SDIRAs)

You can fund a self-directed IRA using traditional or Roth contributions (meaning the $7,000 and $8,000 contribution limits in 2024). But the difference between these accounts is mainly one of account custody and investment choices.

Unlike traditional and Roth IRAs, the IRS requires that all SDIRAs have a certified custodian or trustee who manages the account. These third parties handle the setup process and administrative duties of the IRA (e.g., executing transactions and assisting with account maintenance).

SDIRAs also give investors access to a wider range of investment options. With traditional and Roth IRAs, you're limited to mutual funds, ETFs, stocks, and other traditional investments. But, SDIRAs allow you to invest in alternative assets like real estate, precious metals, and cryptocurrencies .

Nondeductible IRAs

Nondeductible IRAs are great for those who don't meet the income limits of Roth IRAs or make too much to qualify for a traditional IRA. For example, suppose you're filing taxes as an individual. In that case, you won't be eligible for a Roth IRA (even discounted contributions) if your MAGI exceeds $161,000 in 2023 or $240,000 for a married couple filing jointly.

Contributions for these accounts aren't tax deductible, meaning you'll fund your IRA with post-tax dollars like a Roth IRA. The difference is that you'll still have to pay taxes on any earnings or interest from the account once you withdraw at age 59 and a half.

Employer-Sponsored Retirement Plans

Employer-sponsored retirement plans are savings vehicles your employer provides. There are several types — including 401(k)s, 403(b)s, 457(b)s, and thrift savings plans — and in some instances, your employer will match a percentage of your annual contributions.

For-profit companies generally offer these plans, and most companies give you the choice between two versions: the traditional 401(k) or the Roth 401(k). Traditional 401(k)s grow with pre-tax dollars, but Roth 401(k)s rely on after-tax contributions, just like with IRAs.

You can contribute up to $23,000 in 2024, and individuals age 50 and older can contribute additional "catch-up" contributions of $7,500. The maximum limit for employer and employee contributions is $69,000 in 2024 (max of $76,500).

Many employers offer a match percentage of your annual contributions that varies for each employer. For instance, if you make $50,000 per year, and your company matches 50% of your 401(k) contributions up to 5% of your salary, your employer can contribute up to $1,250 a year.

No matter how big the match, experts generally consider it to be "free money" and recommend taking advantage wherever possible, even if you only contribute enough to get the full match and nothing more.

Also referred to as tax-sheltered annuities, these retirement plans are typically designated for employees of public schools, 501 (c)(3) tax-exempt organizations, churches, and other non-profit companies. Like 401(k)s, 403(b)s may include employer matches, pre-tax contribution options, and after-tax (Roth) contribution options.

If you're under 50, you can contribute up to $23,000 in 2024. Those aged 50 and above can contribute an additional $7,500. In addition to pre-tax and after-tax contributions, you can contribute to your 403(b) by allowing your employer to withhold money from your paycheck to deposit into the account.

State and local governments and certain tax-exempt organizations can open 457(b)s for their employees. As 403(b)s, you can also contribute to these accounts by asking your employer to set aside portions of your paychecks for your retirement plan. And in some cases, employers may allow you to make Roth — or after-tax — contributions. 

Like 401(k)s and 403(b)s, the catch-up contribution limit is $7,500.

Thrift Savings Plans

Thrift savings plans (TSPs) are retirement accounts for federal and uniformed services employees. Like 401(k)s, these plans let you contribute pre- or post-tax dollars. But, unlike many 401(k) employer matches, most TSPs offer a full 5% contribution match. Your employer will match your contributions up to 5% of your salary.

The annual contribution limit for 2024 is 23,000. The catch-up contribution limit is $7,500. You can make up to $69,000 in 2024.

Retirement Plans For Self-Employed Individuals and Small Businesses

You'll have multiple retirement savings plans if you're self-employed or a business owner with fewer than 100 employees. Each plan has unique contribution limits and eligibility requirements. Take a closer look at your options below.

Solo 401(k)s

Solo 401(k)s are an option for self-employed individuals or business owners without full-time employees. Self-employed individuals can only contribute in one capacity. Still, business owners can contribute as both an employer and employee (and spouses of business owners may be able to contribute as well), meaning they can contribute twice as much. You can also make pre- or post-tax (Roth) contributions to your account. 

In 2024, the limit increases to $23,000 with up to $7,500 in catch-up contributions. You can earn up to $69,000 in annual contributions. Those aged 50 or older can contribute $76,500.

Simplified employee pension (SEP) IRAs are retirement vehicles managed by small businesses or self-employed individuals. According to the IRS, employees (including self-employed individuals) are eligible if they meet the following requirements:

  • Have reached age 21
  • Have worked for the employer in at least three of the last five years
  • Received at least $750 in compensation in 2022

SEP IRAs also require that all contributions to the plan are 100% vested. This means that each employee holds immediate and complete ownership over all contributions to their account, including any employer match.

Vesting protects employees against financial loss. For instance, according to the IRS, an employer can forfeit amounts of an employee's account balance that isn't fully vested if that employee hasn't worked more than 500 hours in a year for five years.

You can contribute up to $69,000 or 25% of your employee's compensation in 2024. However, unlike the solo 401(k), you can't make Roth (after-tax) or catch-up contributions.


SIMPLE IRAs are available to self-employed individuals or small businesses with no more than 100 employees. According to the IRS, these retirement plans require employers to match each employee's contributions on a dollar-for-dollar basis up to 3% of the employee's salary.

To qualify, employees (and self-employed individuals) must have made at least $5,000 in the last two years and expect to receive that same amount during the current year. But once you meet this requirement, you'll be 100% vested in all your SIMPLE IRA's earnings, meaning you have immediate ownership over both your and your employer's contributions. 

Employees can contribute up to $16,000 in 2024. You can also add on a catch-up contribution of $3,500 if you're 50 or older.

Payroll Deduction IRAs

There's an even simpler way for small businesses to set up IRAs for employees. With payroll deduction IRAs, businesses delegate most of the hard work to banks, insurance companies, and other financial institutions. Self-employed people can also set up these retirement accounts.

In other words, employees can set up payroll deductions with those institutions to fund their IRAs. But you'll first need to consult your employer to determine which institutions it has partnered with. These accounts are generally best for employees who don't have access to other employer-sponsored retirement plans like 401(k)s and 457(b)s.

For 2024, you can contribute up to $7,000 in annual contributions and up to $1,000 in annual catch-up contributions for employees aged 50 or older. This means you can set aside up to $8,000 if you're at least 50 years old. 

Individual retirement accounts (IRAs) are better retirement plans than a 401(k) for people looking for lower account fees, more investment options, and increased flexibility. If you don't have access to an employer-sponsored 401(k) or similar plan, then an IRA may be a good option. 

IRAs and employer-sponsored retirement plans like 401(k) plans and 403(b)s are the best ways to save for retirement. The best retirement plan for you depends on the kind of tax advantages you're looking for (pre-tax benefits or after-tax benefits) and whether or not you have access to an employer-sponsored plan with matching benefits. 

$200 a month can be a good amount to contribute toward your retirement, depending on your current age and how long you have until you reach retirement age. You may not be able to contribute much, but contributing a little toward retirement is better than not contributing at all due to compound interest. 

Why You Should Trust Us: Our Expert Panel For The Best Retirement Plans

We interviewed the following investing experts to see what they had to say about retirement savings plans. 

  • Sandra Cho , RIA, wealth manager, and CEO of Pointwealth Capital Management
  • Tessa Campbell , Investment and retirement reporter at Personal Finance Insider

What are the advantages/disadvantages of investing in a retirement plan?

Sandra Cho:

"The main advantage is the tax implications of the account. Depending on the account, taxes will either be deferred or not included at all. For employer-sponsored retirement plans like 401(k)s, contributions to the plan are made with pre-tax funds, and the account grows tax-deferred. Taxes are then owed upon withdrawal.

"Roth IRAs, on the other hand, are contributed to with post-tax funds but grow tax-free. Both should be included in an investor's portfolio. Another advantage is that 401(k)s often have an employer matching component. That is, an employer will match your contributions up to a certain point (usually around 3% of your salary). 

"The disadvantage is that retirement accounts have a max contribution limit. Another disadvantage is that these funds cannot be used until age 59 1/2. For younger investors, that can be a long time wait."

Tessa Campbell: 

"Tax benefits and compound interest are two of the major advantages of contribution to a retirement savings plan like a 401(k) or individual IRA. Depending on the kind of plan you open (traditional or Roth), you can benefit from contributions after- or post-tax dollars. In addition, some 401(k) plans are eligible for employer-sponsored matches, which are essentially free money.

"The disadvantage of a retirement plan is that you won't be able to access the funds in your account penalty-free until you're at least 59 1/2 years old. Unless there are no other options, early withdraws from a retirement savings plan isn't advised."

Who should consider opening a retirement plan?

"Every individual should be investing through a retirement plan if they have the financial capability to. At the minimum, investors should try to contribute up to the matching amount for their 401(k) and the maximum amount for their Roth IRA. The growth in these funds compounds over time, helping to enhance the long-term return."

Tessa Campbell:

"I can't think of a single person that wouldn't benefit from a retirement savings plan, other than maybe someone that is already well into retirement. Although some younger individuals don't feel the need to start contributing quite yet, it's actually better to open an account as soon as possible and take advantage of compound interest growth capabilities."

Is there any advice you'd offer someone who's considering opening a retirement plan?

"I would advise them to work with a financial advisor or trusted professional. This will give them insight into where they should be investing their money, whether that be a 401(k), Roth IRA, or another vehicle. There are plenty of people and sources out there who provide important information and can help you create a strong financial future."

"Don't contribute huge portions of your salary if it doesn't make sense with your budget. While contributing to a retirement savings plan is important, you must still afford your monthly expenses and pay down an existing debt. If you're having trouble establishing a reasonable budget, consult a financial advisor or planner for professional help."

Which Retirement Plan is Best For You?

If you're not a small-business owner or self-employed, the best retirement plan for you usually depends on your type of employer, marital status, and short- and long-term savings goals. 

However, for most employer-sponsored retirement accounts, you can decide whether to make pre-tax or post-tax (Roth) contributions to your account. Roth contributions are best for those who expect to pay more in taxes as they age, but you should consider pre-tax contributions if you don't mind paying taxes when you withdraw money from your account in retirement.

You can boost your retirement savings even more by opening a separate IRA in addition to your employer-sponsored plan (you can still save toward retirement with an IRA if you're unemployed).

company retirement plan types

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9 types of retirement accounts

company retirement plan types

Key takeaways

  • Retirement accounts offer many ways to save money and invest for the future.
  • Each type of retirement account has different advantages to help you get the most bang for your buck.
  • Understanding the most common retirement accounts can help point you in the right direction when planning for the future.

At this point in your life, retirement may feel like a galaxy that's far, far away. And the language spoken there—401(k), 457(b), IRA—can sound a lot like droid's code. But those terms (and a few more) are the names of different types of investment accounts. This guide to the basics will help you make sense of the lingo, understand how the different accounts work, and identify which might be best for your needs ... right here on Earth.

Here's a breakdown of some of the more common retirement accounts.

You've probably heard of this before and for good reason: More than 60 million Americans (roughly 38% of the working population) have a 401(k), 1 making it one of the most popular ways to save for retirement.

401(k)s let you set aside part of each paycheck into an account, where (depending on your plan options) you can invest in things like mutual funds and ETFs. In addition, many employers match your contributions (you put in $100, they put in $100), up to a certain percentage of your total salary. Lots of workplaces offer 401(k)s in their employment benefits packages.

One of the most appealing aspects of a 401(k) is that in most cases your contributions go in "pre-tax" 2 : Whatever amount you put into it (up to $22,500, or $30,000 if age 50 or over, for 2023) excluding employer contributions, is deducted from your income before you're taxed on your income for the year. You only pay tax when you withdraw from the 401(k) plan. If you withdraw after age 59½ there's no tax penalty, but any withdrawals that occur before that may incur a 10% penalty of what you withdraw on top of regular income taxes. The earlier you start contributing to a 401(k), the more time you give your money to benefit from potential compound returns.

Learn more about 401(k)s

403(b) and 457(b)

Nonprofit organizations and government agencies tend to offer 403(b) plans. They're a lot like 401(k)s—in most cases, you devote a certain amount pre-tax with every paycheck.

Some nonprofits and government agencies also offer 457(b) plans. As with 401(k)s and 403(b)s, you contribute pre-tax earnings in most cases. But unlike those other 2 plans—which can have you on the hook for high penalties as well as taxes if you withdraw before age 59½—the 457(b) lets you withdraw your money penalty-free after you leave your job with the plan-offering employer as long as you haven't rolled-in other 401(k) or 403(b) assets.

To learn more, check out these resources from the IRS about 403(b)s .

Pensions are not technically an account, but they are another way people save for retirement. Although far less common than during their peak in the 1970s, pension plans are still offered by some employers and unions. Usually, your employer contributes money on your behalf over time into an investment account managed by your employer or union. So, unlike a 401(k) or 403(b), a pension is not your own account or fund. Your employer then invests your (and your co-workers') money with the agreement that when you retire, you will receive a predetermined amount in either a lump-sum payout or monthly installments, often for the rest of your life. That's why pensions are sometimes called "defined benefit plans."

While you have less flexibility in choosing what to invest in and when to withdraw, a pension can help reduce longevity risk, or the risk of outliving your savings, because, in most cases, the employer must pay you the predefined amount in retirement until the day you or your beneficiary dies. A pension can guarantee you income for life, unlike other retirement accounts which have no guarantee. And, often, pensions are protected by federal insurance (within certain limitations) by the Pension Benefit Guaranty Corporation (PBGC).

For more on pensions, check out the PBGC's resources .

Traditional IRA

An individual retirement account (IRA) lets you contribute directly, without a workplace sponsor (as with 401(k)s and 403(b)s). In a traditional IRA, you can make contributions up to the annual limit. But if you're within certain income limits ($83,000 or less if single and $136,000 or less if married) you may be able to deduct all or a portion of that contribution from your current taxable income to reduce your federal income tax when you file, even if you're maxing out contributions to a 401(k) or 403(b). Your income does have to be greater than or equal to your contributions, though. 3 If you are not covered by a workplace sponsored plan, you may be able to deduct more from your current taxable income.

Once in the account, those dollars can potentially grow until you withdraw them in retirement, at which point you'll need to pay taxes on the income. Similar to 401(k)s, penalties may apply if withdrawing before age 59½.

Learn more about traditional IRAs .

With a Roth IRA, you contribute after-tax dollars and can't deduct contributions from your taxes. But any investment gains the account makes are yours in retirement without having to pay capital gains and income taxes, if you meet certain qualifications on Roth distributions. 4 However, similar to traditional IRAs, withdrawing money prior to age 59½ or without satisfying the IRS's  5-year aging rule  may result in taxes and/or penalties.

As with traditional IRAs, you can contribute to a Roth IRA even when you have a workplace 401(k) or 403(b) plan, or as long as you have earned income from a job or self-employment. The IRS does set an income limit to be eligible to contribute to a Roth IRA, though.

Learn more about Roth IRAs .

Rollover IRA

When you leave a job, you can typically transfer your 401(k) or 403(b) to your new workplace. Or you can roll it into an IRA. You may be able to leave this money in your existing plan, but you should check with you employer to see if that is an option under your plan.

A rollover IRA offers access to a wider range of investment options (and lets you personalize your choices) than some workplace plans, while still preserving the tax savings you earned when you initially contributed to your 401(k). Some people may choose to roll over their workplace plans to an IRA if they switch from a salaried job to freelance work. And a rollover IRA can be a convenient way to consolidate many workplace plans from different jobs into a single account. Be sure to consider all your available options and the applicable fees and features of each before moving your retirement assets.

Learn more about rollover IRAs .

Roth 401(k)

A Roth 401(k) mixes the advantages of a 401(k), in that contributions are made regularly and directly from your paycheck, and a Roth IRA, in that contributions are made after taxes are taken out. 5 In a Roth 401(k), your money can then potentially grow tax-free, and you don't have to pay any taxes when you withdraw in retirement after age 59½, or after age 55 if you retire from the employer where the account is held. Similar to a Roth IRA, you must satisfy the 5-year rule before withdrawing any funds to avoid paying potential penalties or taxes. Unlike a Roth IRA, there are no income limits. Many people open and contribute to a Roth 401(k) early in their careers when they have less income and consequently have a lower income tax rate.

See if a Roth 401(k) may make sense for you .

Although your health care costs might be low today, they will likely be higher in retirement. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2023 may need about $315,000 just to cover health care expenses. 6 An HSA can be a helpful tax-advantaged way to save for future costs, and in the short term, stash away funds for medical emergencies.

In order to open an HSA, you need to be covered by an HSA-eligible health plan (a.k.a. a high-deductible health plan). With an HSA, you may be able to contribute pre-tax dollars from your paycheck automatically, and your employer might even match those contributions. You can use money in your HSA to pay for qualified medical expenses, and you can invest your contributions (in stocks, bonds, ETFs, mutual funds, or other options) where they can grow tax-free. The money you take out now won't get taxed either if it goes toward qualified medical expenses, such as doctor visits and prescriptions. 7 If you need to use the funds for other purposes, you may be subject to a 20% penalty and income taxes, but that penalty goes away after age 65 when only income taxes would apply.

For more on why an HSA could be a smart way for you to save for expenses today and in retirement, read 6 benefits of an HSA in your 20s and 30s .

Saving for retirement requires a plan and a process. It's helpful to know which accounts are which, but nobody expects you to know all the answers or to plan for retirement on your own. For help making your own retirement plan, consider working with us .

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"401(k) plan research: faqs," investment company institute, october 11, 2021. 2. assuming your plan doesn't allow for roth or "after-tax" contributions. 3. in 2023, full deductibility of a contribution is available to covered individual whose 2023 modified adjusted gross income (magi) is $116,000 or less (joint) and $73,000 or less (single); partial deductibility for magi up to $136,000 (joint) and $83,000 (single). in addition, full deductibility of a contribution is available for non-covered individuals whose spouse is covered by an employer sponsored plan when filing jointly with a magi of $218,000 or less in 2023; and partial deductibility for magi up to $228,000. if neither you nor your spouse (if any) is a participant in a workplace plan, then your traditional ira contribution is always tax-deductible, regardless of your income. 4. a distribution from a roth ira is tax-free and penalty-free provided that the five-year aging requirement has been satisfied and one of the following conditions is met: age 59½, death, disability, qualified first time home purchase. 5. a distribution from a roth 401(k) is federally tax free and penalty free, provided the five-year aging requirement has been satisfied and one of the following conditions is met: age 59½, disability, or death. 6. estimate based on a single person retiring in 2023, 65-years-old, with life expectancies that align with society of actuaries' rp-2014 healthy annuitant rates projected with mortality improvements scale mp-2020 as of 2022. actual assets needed may be more or less depending on actual health status, area of residence, and longevity. estimate is net of taxes. the fidelity retiree health care cost estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, original medicare. the calculation takes into account medicare part b base premiums and cost-sharing provisions (such as deductibles and coinsurance) associated with medicare part a and part b (inpatient and outpatient medical insurance). it also considers medicare part d (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by original medicare. the estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care. 7. with respect to federal taxation only. contributions, investment earnings, and distributions may or may not be subject to state taxation. please consult with your tax advisor regarding your specific situation. fidelity does not provide legal or tax advice. the information herein is general and educational in nature and should not be considered legal or tax advice. tax laws and regulations are complex and subject to change, which can materially impact investment results. fidelity cannot guarantee that the information herein is accurate, complete, or timely. fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. consult an attorney or tax professional regarding your specific situation. keep in mind that investing involves risk. the value of your investment will fluctuate over time, and you may gain or lose money. this information is intended to be educational and is not tailored to the investment needs of any specific investor. fidelity brokerage services llc, member nyse, sipc , 900 salem street, smithfield, ri 02917 1031319.2.0 mutual funds etfs fixed income bonds cds options active trader pro investor centers stocks online trading annuities life insurance & long term care small business retirement plans 529 plans iras retirement products retirement planning charitable giving fidsafe , (opens in a new window) finra's brokercheck , (opens in a new window) health savings account stay connected.

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What Kind of Retiree Will You Be?

company retirement plan types

Jeff Montgomery, 70, has always been an active, highly engaged person—and he's no different in retirement.

Upon retiring at age 63, the former managing partner of a London private equity firm first transplanted his wife and teenage daughter to Tokyo and immersed himself in Japan's jazz scene, a pet interest. Afterward, the family relocated to Colorado, where they rebuilt a ski chalet into a full-time residence. "When your identity is all about ambition and working toward a goal, you can't just give that up," he reflects.

Jeff's high-achieving version of retirement, which also includes serving on charitable boards, is not for everyone. However, it does raise an important question: What do you want your retirement to look like—and how much planning have you done to realize it?

"Retirement planning doesn't begin and end with the size of your nest egg," says Justin Richards, CFP ® , CWS ® , a Colorado-based senior financial planner for Schwab Wealth Advisory. "It's just as important to consider how you'll spend your time, especially given the extra hours you'll gain once you stop working. Without a plan, many retirees can feel aimless and unfulfilled."

But how do you begin to plan the retirement that's right for you? While everyone's experience is unique, retirees often fall into one of five categories. Read on to discover which type most resonates with you—and what to consider as you near and enter retirement.

You love your career, and you pride yourself on being productive and useful.

company retirement plan types

According to the Pew Research Center, roughly 20% of adults ages 65 and older are still employed. 1 "I have a client who's 79 years old and still a practicing lawyer," Justin says. "He's invested 100% in stocks because he never wants to quit working and is mainly concerned with leaving a legacy."

Full- or part-time work can deliver a sense of purpose—to say nothing of extra income, which can help extend your retirement savings. Jeff, for example, consulted for his old firm for five years after resigning his partnership in 2017. "Consulting allowed me to remain engaged while still leaving time for family and new projects," he says.

Be that as it may, working in retirement can affect:

  • Medicare premiums : Although retirees generally don't pay premiums for Medicare Part A, which covers hospitalization, they typically pay premiums for Part B, which covers outpatient visits, as well as Part D for private prescription drug coverage—unless they're covered under a qualified employer health insurance plan. The additional earnings can push those premiums up if your total annual income exceeds certain thresholds, though you may be able to appeal the increase after you retire.

A premium on premiums

The higher your income, the more Medicare Part B and private Part D coverage will cost.

  • 2022 income, single filer
  • 2022 income, married filing jointly
  • Part B premium
  • Part D premium
  • 2022 income, single filer $103,000 or less -->
  • 2022 income, married filing jointly $206,000 or less -->
  • Part B premium $174.70 -->
  • Part D premium Plan premium (varies) -->
  • 2022 income, single filer $103,001 to $129,000 -->
  • 2022 income, married filing jointly $206,001 to $258,000 -->
  • Part B premium $244.60 -->
  • Part D premium Plan premium + $12.90 -->
  • 2022 income, single filer $129,001 to $161,000 -->
  • 2022 income, married filing jointly $258,001 to $322,000 -->
  • Part B premium $349.40 -->
  • Part D premium Plan premium + $33.30 -->
  • 2022 income, single filer $161,001 to $193,000 -->
  • 2022 income, married filing jointly $322,001 to $386,000 -->
  • Part B premium $454.20 -->
  • Part D premium Plan premium + $53.80 -->
  • 2022 income, single filer $193,001 to $499,999 -->
  • 2022 income, married filing jointly $386,001 to $749,999 -->
  • Part B premium $559.00 -->
  • Part D premium Plan premium + $74.20 -->
  • 2022 income, single filer $500,000 or more -->
  • 2022 income, married filing jointly $750,000 or more -->
  • Part B premium $594.00 -->
  • Part D premium Plan premium + $81.00 -->

Medicare.gov . Your 2022 modified adjusted gross income determines your 2024 premiums. Premiums are per individual.

  • Pension benefits : Working part-time may influence your pension payout , which typically is calculated using your average salary for the last three or five years of work. If your part-time income is significantly less than your full-time income, you could see a drastic reduction in your benefit.
  • Social Security benefits : Starting in the month you reach full retirement age, there's no limit on how much you can earn and still receive your full benefit. However, if you collect benefits prior to reaching your full retirement age (between 66 and 67, depending on birth year), your payouts could be reduced . For example, if you're under full retirement age for all of 2024, your benefits will be reduced by $1 for every $2 you earn above the annual limit of $22,320.

"If you have ample retirement savings and don't need the income, you might consider whether something like volunteering your time makes more sense," Justin says (see "The Philanthropist").

The Adventurer

You stay active, are in good health, and have always wanted to fill up your passport pages.

company retirement plan types

"Today's retirees generally are healthier, live longer, and want to do more than their predecessors," observes Kate Goesel, CFP ® , a senior manager with Schwab's Centralized Planning Group in Chicago. "But the more you do, the more money you may need to do it, especially as it pertains to travel."

A common rule of thumb is to plan for your retirement expenses to equal 80% to 100% of your current expenses. If you have big travel plans, however, you may need upwards of 120%, at least in your early retirement years.

To help foot the added costs, retirees who plan to travel extensively often downsize or move to a lower-cost city.

Retirees traveling internationally should also beware that Original Medicare typically won't pay for health care expenses incurred outside the U.S. While some Medicare Advantage and Medigap plans may offer coverage abroad , you may need to budget for additional travel insurance that covers emergency medical expenses.

The Philanthropist

You enjoy giving back and want to dedicate more of your time to worthy causes.

company retirement plan types

Roughly a quarter of U.S. retirees spend part of their time volunteering, lending their connections, experience, and knowledge to nonprofit organizations. "These acts of service often provide a renewed sense of purpose and a new source of joy for retirees," Justin says.

There are generally two ways to volunteer your time:

  • Make a regular commitment : "Enlisting in a regular shift at a local charity is an ideal fit for people who are ready to retire but still want to remain active," Kate says. However, be aware that volunteer hours are not tax-deductible. 2
  • Serve on a board : Those with corporate experience often find they can leverage those skills by serving on a nonprofit board . Nevertheless, many organizations require board members to make a financial commitment, either personally or through fundraising. If you're not willing or able to meet that expectation, supporting the organization in another way may be a better option.

The Homebody

You're done with work, and you dream of gardening, golf, and grandkids.

company retirement plan types

For many people, retirement means fully decompressing from a lifetime of work. "Not everyone is looking for a second career or monthslong travel," Justin says. "Some people just want to enjoy a quieter life at home."

If your vision includes hours in the garden or long walks around your neighborhood, your home should reflect those desires. "Relocating is a common part of the retirement puzzle, whether to be closer to family, reduce living expenses and taxes, or live in a more walkable location," Kate says.

However, if your current home is right where you want to be, you may still need to age-proof it. The National Association of Home Builders (NAHB) recommends consulting with an occupational therapist and a Certified Aging-in-Place Specialist (CAPS), who can recommend common features to consider, such as widening doorways for wheelchair access or installing handrails, particularly in bathrooms.

"There's also a movement among retirees to build guesthouses, or accessory dwelling units, on their properties," says Anna Sinatra, CFP ® , CWS ® , a financial planner for Schwab Wealth Advisory in Phoenix. "Doing so allows them to rent out the dwellings for extra income in the early years of retirement—and provides an easy place to house a live-in caregiver should the need arise."

To find a CAPS in your area

Call the NAHB at 800-368-5242 or visit the website , select Professionals with Home Building Designations, then CAPS.

You value community and want a curated retirement experience.

company retirement plan types

Resort-style retirement communities are growing in popularity—and it's not hard to understand why. The Villages in central Florida, for example, has more than 50 golf courses—as well as basketball, bocce, swimming, tennis, and, of course, pickleball—along with social clubs and entertainment complexes. There's something for everyone.

Such amenities might seem superfluous to some, but residents of retirement communities report better emotional, intellectual, physical, and social wellness than those who live in the community at large. 3 Plus, independent-living communities typically offer a more maintenance-free lifestyle, with some including housekeeping, meals, and even transportation.

For retirees who enjoy an active, independent lifestyle but have an eye on the future, life plan communities (often called continuing care retirement communities, or CCRCs) can offer the best of both worlds. They offer independent living as well as access to higher levels of care—such as assisted living or skilled nursing—on an as-needed basis.

Of course, life plan communities often have costs to match their utility, with average entrance fees of $402,000 and rents that average more than $3,500 per month, according to the National Investment Center for Seniors Housing & Care. More amenities or a higher level of care usually means higher monthly costs. That said, the IRS may recognize a percentage of both the entrance fee and monthly fee as a medical expense deduction.

"Clients who don't wish to rent their home or keep it as an inheritance asset sometimes sell their real estate to assist with funding entrance fees," Justin says. In that case, you'll want to understand the potential capital gains liabilities of selling your home. Simply subtract your cost basis (the price you paid for the house, plus closing costs and outlays for major improvements) from the sale price. You'll be able to exclude the first $250,000 in profit ($500,000 if married filing jointly) from the sale, provided it's your primary residence, you've owned it for at least two years, and you have lived there for at least two of the past five years.

To find a CCRC in your area

Visit the U.S. Administration on Aging's Eldercare Locator , or call 800-677-1116.

Start early

"Although I decided at age 60 that I wanted to retire at 63, the planning started 20 years earlier," Jeff Montgomery recalls. "My retirement wasn't a single event but rather a slow and steady process that included not just the right financial advisors but also building friendships and a sense of community."

"Don't wait until you get to retirement to start thinking about what you want from this next phase of life," Kate says. "The sooner you start planning, the more time you have to fine-tune your vision—and adjust as necessary to help make your dreams a reality."

The No. 1 risk to your retirement

Long-term care costs can upend even the best-laid plans.

Along with newfound freedoms, retirement can also mean confronting discomfiting end-of-life scenarios. "The biggest derailer of retirement by far is long-term care," says financial planner Kate Goesel. "Even those with substantial retirement savings can be caught short by end-of-life expenses."

Consider that the average woman needs long-term care for 3.7 years, and the average man for 2.2 years, 4 according to the U.S. Department of Health and Human Services' Administration for Community Living. What's more, the median annual cost of a private room in an assisted living facility in 2023 was $116,800 5 —an expense not covered by Medicare.

If unforeseen medical issues make staying at home difficult, it's possible your home's equity could be used to fund long-term care. Another option is long-term care insurance—although many policies don't cover the first 90 days of care, nor do they typically cover nonrefundable first- and last-month deposits. Family support often supplements these options, with adult children taking on caregiving duties for elderly parents. The AARP's Family Caregiving site is an excellent resource for retirees facing such responsibilities.

1 Richard Fry and Dana Braga, " Older Workers Are Growing in Number and Earning Higher Wages ," pewresearch.org, 12/14/2023.

2 " Providing Disaster Relief through Charitable Organizations: Working with Volunteers ," irs.gov, 03/04/2024.

3 " The Age Well Study ," matherinstitute.com, 06/09/2023.

4 " How Much Care Will You Need? " LongTermCare.gov, 02/18/2020.

5 " Cost of Care Survey ," genworth.com, 12/2023.

What's your next step toward retirement?

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Related topics.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Investing involves risk, including loss of principal.

The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, individualized tax, legal, or investment advice. Tax laws are subject to change, either prospectively or retroactively. Where specific advice is necessary or appropriate, individuals should contact their own professional tax and investment advisors or other professionals (CPA, Financial Planner, Investment Manager) to help answer questions about specific situations or needs prior to taking any action based upon this information.

Schwab Wealth Advisory™ ("SWA") is a non‐discretionary investment advisory program sponsored by Charles Schwab & Co., Inc. ("Schwab"). Schwab Wealth Advisory, Inc. ("SWAI") is a Registered Investment Adviser and provides portfolio management for the SWA program. Schwab and SWAI are affiliates and are subsidiaries of The Charles Schwab Corporation.

Jeff Montgomery is not a client of Schwab and was not compensated by Schwab for their comments. The experience described may not be the experience of all clients and is no guarantee of future performance or success. 

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A Retirement Readiness Checklist

Evaluating your retirement plan can be more manageable if you break it into smaller steps.

company retirement plan types

Editor’s Note: This article previously appeared on July 12, 2023.

As the mother of six kids, one of whom had special needs, my mom was organized, to say the least. She carefully calibrated her schedule to accommodate her many responsibilities, and she relied on lists, always lots of lists, to keep everyone and everything on track. My sisters and I once found a checklist of to-dos, complete with addenda for packing the suitcases and food, that she had written before a family vacation. It was as detailed as if she had been a military general taking us all into battle.

My mom knew then what research has subsequently proved and what whole books have been devoted to: Using checklists can help us avoid mistakes, be more efficient, and reduce stress. Checklists can also take seemingly enormous, daunting jobs—like taking a family of eight on the road for two weeks—and make them seem doable by breaking them into smaller, more manageable steps.

Gauging your financial affairs in advance of retirement is a job that lends itself well to a checklist. Of course, financial management before and in retirement is so complex that I’d recommend that you also obtain professional help, or at least a second opinion on your plan, before you embark on it. But even if you ultimately end up employing a financial advisor to be your guide as you prepare to retire, using a checklist can help you comprehend the key variables that will make your retirement plan succeed or fail. It can help you course-correct before it’s too late.

If you're starting to think about retirement and what your retirement plan should look like, here's a checklist to help you think through the key variables.

  • Consider your retirement date.
  • Assess your in-retirement income needs.
  • Quantify and maximize pension and Social Security benefits.
  • Evaluate the appropriateness of annuities.
  • Determine whether your planned retirement spending rate is maintainable.
  • Craft a long-term portfolio based on your anticipated retirement income needs.
  • Pay attention to tax management.
  • Assess insurance coverage.
  • Attend to your estate, portfolio succession plan.

1) Consider Your Retirement Date

One of the key steps as you develop your retirement plan is considering when you plan to retire. Of course, the financial payoff of working longer has been well documented: Delayed portfolio withdrawals, additional retirement plan contributions and tax-deferred compounding , and a larger Social Security benefit can all contribute to a plan’s durability.

But it’s worthwhile to consider your expected retirement date from a number of additional angles, not just the financial dimension. You’ll also want to consider quality-of-life issues, health, and whether you can actually continue to do your job later in life.

It’s also important to bring a healthy dose of humility to retirement-date planning. Research from David Blanchett, formerly of Morningstar and now at PGIM, has demonstrated that people often do a poor job of estimating when they expect to retire. People who thought they would hang it up early often ended up working longer than they estimated, whereas many who had anticipated delaying retirement didn’t do so. Health issues or layoffs often force people out of the workforce earlier than they might consider ideal, while others continue to work longer than they anticipated because they need or enjoy their jobs or value the social dimension. In other words, as valuable as it is to set a goal date for retirement, you may end up deviating from it for one reason or another.

2) Assess Your In-Retirement Income Needs

The next step in the process is to take stock of your planned in-retirement spending. One common rule of thumb for that job is the 80% rule—that is, in retirement, you'll need to replace about 80% of your working income. Taxes may go down and you don't have to save as you did when you were working, which represents the bulk of that 20% reduction.

But affluent retirees tend to spend much less than 80% of their working incomes, on average, whereas retirees with lower working incomes tend to consume a higher percentage of their working incomes in retirement. That's only logical, in that affluent households likely have heavier savings rates, whereas lower-income households consume a bigger share of what they make.

Moreover, many retirees plan lifestyle changes in retirement that will affect their spending. Some retirees may be planning to downsize or move to a lower-cost part of the country to make retirement more affordable, for example, while other retirees may expect spending to increase because of heavy travel plans. Making lifestyle adjustments like these can be incredibly impactful from a financial standpoint, but they may not be agreeable to many.

Because forecasting your anticipated income needs is such an important component of crafting your retirement plan, make sure you rightsize your income needs by looking at your expected outlays line item by line item. Also remember that your spending won't necessarily be static from year to year; you may have higher-spending years, especially in the early and later parts of retirement, and lower-spending ones, too.

3) Quantify and Maximize Pension and Social Security Benefits

How much of those income needs will be supplied by sources other than your portfolio—for example, Social Security and/or pension income? The next step in the process is to quantify how much income you’ll receive from those sources and to consider how your decisions can enlarge or shrink those benefits. Delaying Social Security , for example, will enlarge your eventual benefit and is often a good option for people who anticipate longer-than-average life expectancies. On the other hand, opting for the pension payout that doesn’t just cover you for your lifetime but also provides a benefit for your spouse if you predecease them will reduce the payout that you receive.

These decisions are mission-critical: The more of your income that you're able to replace with Social Security or a pension, the less you'll have to rely on your own portfolio to pay the bills. Making smart pension decisions is personal and a good spot to get some professional help. For a window into how various Social Security filing strategies might affect your eventual benefits, I'm a fan of the free tool Open Social Security .

4) Evaluate the Appropriateness of Annuities

If Social Security and/or a pension will supply you with less income than you need for basic expenses—housing, food, utilities, and insurance, for example—an annuity may be appropriate. Annuities can be another source of lifetime income, but they can also be devilishly complicated and, in some cases, quite costly. Before sinking a portion of your assets into an annuity, it’s important to thoroughly understand what you’re getting: whether you need such a product in the first place , what type of annuity might be right for your needs , and where to hold the annuity and how much to put into it .

5) Determine Whether Your Planned Retirement Spending Rate Is Reasonable

Once you've determined your in-retirement income needs and how much of them will be covered by certain sources such as Social Security (and possibly an annuity), your portfolio is going to have to supply the amount that's left over. The annual dollar amount you plan to withdraw from your portfolio, divided by your portfolio's current value, is your withdrawal rate (or even better, your spending rate).

What’s a reasonable withdrawal rate? People embarking on retirement planning often start with the 4% guideline, which revolves around withdrawing 4% of a portfolio’s value in Year 1 of retirement, then inflation-adjusting that dollar amount thereafter. That system would have worked over a wide variety of 25- to 30-year periods over modern market history, and our recent research on safe withdrawal rates suggests that it’s still a good starting point when thinking about retirement drawdowns. Our research also points to the value of flexibility when thinking about how much you can withdraw from year to year, as doing so allows for a higher starting withdrawal percentage.

6) Craft a Long-Term Portfolio Based on Your Anticipated Retirement Income Needs

Once you've determined your spending plan, the next step is to structure your portfolio to support it. Long gone are the days when retirees can subsist on the income from their cash and bonds; today's retirees also need the long-term growth potential from stocks.

To help structure your portfolio, I like the idea of using your cash flow needs to determine how much to hold in cash, bonds, and stocks. In my model Bucket portfolios , for example, I’ve held near-term spending needs (two years’ worth) in cash, another eight years’ worth of cash flow needs in bonds and dividend-paying equities, and the remainder of the portfolio in globally diversified stocks. That provides a roughly 10-year buffer in case stocks decline and stay down for a long time. The key is using your own cash flow needs to inform your asset-allocation positioning.

7) Pay Attention to Tax Management

It would be so simple if we could each bring just a single portfolio into retirement, but the reality is much messier. Most retirees hold their assets in a variety of tax silos: tax-deferred , taxable , and Roth . Each of these accounts carries its own tax treatment, which has implications for the types of securities you hold within them. In addition to “asset location” considerations, it’s also worthwhile to harmonize how you’ll withdraw from these accounts for your cash flow needs, as doing so can reduce the drag of taxes on your withdrawals.

Basic withdrawal-sequencing guidelines are a starting point, but the best withdrawal strategies factor in required minimum distributions and Medicare and Social Security taxation, among other issues. Early retirement, before required minimum distributions commence, may also be a good time to consider making changes, such as converting traditional IRAs to Roth . If all of this sounds complicated, it is—which is why it’s wise to get some tax guidance as you plan your withdrawal strategy.

8) Assess Insurance Coverage

Nearly all of the insurance coverage that made sense while you were working—auto and homeowners insurance, for example—will still be necessary while you’re retired. But Medicare adds a new wrinkle to healthcare coverage for retirees, along with purchasing supplemental coverage to pick up what Medicare doesn’t. It’s also worthwhile to consider other types of coverage, notably long-term-care insurance, well before you’re retired. The decision about how to cover long-term-care outlays if they arise is a complicated one, made even murkier by the pandemic and a changing marketplace for long-term care . I’ve developed a guide to help you assess how you’ll cover long-term care.

9) Attend to Your Estate, Portfolio Succession Plan

Documenting your wishes in case you should die or become incapacitated is valuable at every life stage, but it takes on increasing importance when we age. What do you want to happen to your financial assets? Whom do you want to be able to make important financial and healthcare decisions on your behalf? What instructions do you want to give your spouse or other loved ones about your portfolio? Retirees and preretirees should ask—and answer—all of these questions when they’re of sound mind and body and update their estate plans and beneficiary designations periodically to reflect their current situations. This is a spot to get some competent legal help—ideally from an attorney who’s well versed in planning for situations like yours.

The onus will be on you for other aspects of estate and succession planning—for example, that your loved ones know how to manage your portfolio, your digital estate, and other matters. The good news is that you can prepare much of this documentation on your own, without paid legal help.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies .

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About the author, christine benz.

Christine Benz is director of personal finance and retirement planning for Morningstar, Inc. In that role, she focuses on retirement and portfolio planning for individual investors. She also co-hosts a podcast for Morningstar, The Long View, which features in-depth interviews with thought leaders in investing and personal finance.

Benz joined Morningstar in 1993. Before assuming her current role she served as a mutual fund analyst and headed up Morningstar’s team of fund researchers in the U.S. She also served as editor of Morningstar Mutual Funds and Morningstar FundInvestor.

She is a frequent public speaker and is widely quoted in the media, including The New York Times, The Wall Street Journal, Barron’s, CNBC, and PBS. In 2020, Barron’s named her to its inaugural list of the 100 most influential women in finance; she appeared on the 2021 list as well. In 2021, Barron’s named her as one of the 10 most influential women in wealth management.

She holds a bachelor’s degree in political science and Russian language from the University of Illinois at Urbana-Champaign.

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10 Steps To Prepare for Retirement

Vance Cariaga

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If your idea of the perfect retirement is to enjoy leisurely mornings and bucket list trips, then you’ll need to start preparing well ahead of time. Planning for retirement starts while you’re still working. Whether you are just beginning your career or want to make up for lost time, now is the perfect time to create a savings plan that will allow you to retire comfortably.

What Are the 10 Steps To Prepare for Retirement?

To ease the process of planning for retirement, it’s a good idea to break it down into some basic steps. You’ll start by creating a vision of your retirement lifestyle that you can turn to over the years as you build your savings.

1. Start Saving Now

No matter how old you are, it’s never too early to start saving for retirement — even if you are fresh out of high school or college and just entering the working world. This means taking a look at the different savings plans available. One option is to open a high-yield savings account dedicated strictly to retirement savings, but that’s just a first step. Many Americans rely on company-sponsored 401(k) plans to build retirement savings. Other options include one-participant 401(k)s if you are a business owner with no employees, 403(b)s, traditional individual retirement accounts (IRAs), Roth IRAs and SIMPLE IRAs.

2. Contribute to Your Employer’s Retirement Savings Plan

If your employer offers a 401(k) plan or other retirement plan, sign up and contribute to it. This is the best and easiest way to start building a retirement fund because your employer takes care of the heavy lifting and all you have to do is agree to have money deducted from your paycheck every pay cycle. You get tax advantages, and if your employer matches your contribution, you get free money that goes into your retirement savings. In 2024, employees who contribute to a 401(k), 403(b), 457 plans and the federal government’s Thrift Savings Plan, can put in up to $23,000.

3. Find Out About Your Employer’s Pension Plan

If your employer offers a traditional pension plan rather than a 401(k) plan — as many government employers do — be sure to find out if you are covered by the plan. You can ask for an individual benefit statement to understand the value of your pension and ensure you know what will happen to your benefits before changing jobs.

4. Invest In an IRA 

If you don’t have access to a 401(k) or pension plan, you should start investing in an IRA to build your nest egg. IRAs offer tax benefits that bolster your retirement savings over time. Even if you have a company-sponsored plan, it’s still a good idea to invest in an IRA to save at a faster rate. Keep in mind that the maximum you can contribute to an IRA in 2024 is $7,000 a year, though if you are 50 or older you get an additional “catch-up” contribution of $1,000 to bring the total to $8,000.

5. Balance Your Portfolio

Saving money for retirement is only part of your overall strategy. You also need to make sure your investments have the right mix of stocks, bonds, mutual funds, ETFs, real estate and other assets. Spreading your investments across a diverse range of assets can mitigate risk and produce steady returns over time.

6. Don’t Touch Your Retirement Savings

When checking the balance of your retirement savings , it’s important to never dip into these accounts unless you’re facing a financial emergency. Taking loans and early withdrawals from your retirement savings can set your retirement plans back years. For example, if your 401(k) plan allows you to take a loan, you’ll be required to repay it — including interest — according to strict terms. If you don’t adhere to these requirements, any unpaid amounts will become a plan distribution.

In most cases, you’ll have to include any previously untaxed amount of the distribution in your gross income the year the distribution occurred. You might also face an additional 10% tax on the amount of the taxable distribution.

7. Set Retirement Goals

Once you have done the early planning, you should set a target age for retirement, no matter how old you are. Some people choose to continue working well into their 60s and 70s, especially if they enjoy the work they’re doing. Others prefer to step out of the workforce to travel or spend time with loved ones while they are still in good health.

You’ll also need to think about the kind of lifestyle you want in retirement. Things to consider include where you’ll live, how much your lifestyle will cost and whether you need to earn extra money through a part-time job or side gig .

8. Determine How Much Money You’ll Need

A big part of enjoying retirement is having enough money to live the lifestyle you want. If you plan to maintain your current standard of living in retirement, you’ll need 70% to 90% of your pre-retirement income, according to the U.S. Department of Labor. If you’re currently earning $60,000 per year, you’ll likely need $42,000 to $54,000 per year in retirement, or $3,500 to $4,500 per month.

If you think Social Security will cover most of this cost, you’re probably mistaken. As of March 2024, the average Social Security retirement benefit was about $1,774 a month, according to the Social Security Administration. That’s not nearly enough to cover the average living costs in the United States.

To help you come up with a good savings goal, take a look at the retirement calculator from GOBankingRates. You can use it to determine how much you might need to save for retirement. It will use factors such as retirement age, savings and income and other details to figure out the amount.

9. Familiarize Yourself With Social Security Benefits

You can start claiming Social Security benefits as early as age 62, but delaying your claim can increase your monthly payments. Full retirement age, which is either 66 or 67 depending on when you were born, is when you qualify for full benefits. After age 70, there’s no financial benefit to delaying further. To be eligible for Social Security retirement benefits, you need a minimum of 10 years of work, equivalent to 40 credits. Your benefit amount is calculated based on your 35 highest-earning years.

10. Hire a Professional

Planning for retirement is not just about setting aside money for the future. You also need to develop an investment strategy that maximizes your returns and helps build an adequate nest egg for your golden years. This involves understanding different investments, managing risk and planning for a long retirement to ensure you don’t run out of money. Beyond that, you need to learn the tax laws and how best to navigate them.

If you have the resources to do so, you should hire a financial advisor to help put together the best plan for your personal financial situation and retirement goals.

What Should I Do 5 Years Before Retirement?

If you’re planning for retirement in the next five years, you’re probably getting excited for this new chapter. Many of the decisions you make now can have a lasting impact on your retirement lifestyle, which is why this period and the first five years after retirement are known as the fragile decade.

You want to make sure you’re taking the right steps now to ensure a smooth financial transition into your golden years. Some actions to take include the following:

  • Maximize all of your retirement accounts if you have the ability to do so.
  • Take a close look at your current budget. Pay down as much debt as possible.
  • Consider purchasing supplemental coverage to assist with medical costs.
  • If you haven’t already, reach out to a fee-only financial planner to make sure your investment plan is on track.
  • Decide exactly where you’ll live and use this to determine your estimated cost of living.
  • Take a closer look at your estimated Social Security monthly benefit.
  • If you don’t already, make sure you have an emergency fund in place, so you don’t have to take extra money out of a taxable retirement fund or get a job if you’re faced with an unexpected major expense.

It’s never too early or too late to start planning for retirement. The more time you spend thinking about the kind of life you want and taking steps to prepare for it now, the more likely you are to enjoy your golden years truly.

Even if retirement is a long way away, the actions you take today will hugely impact your future. Opening a retirement savings account and contributing a portion of each paycheck might mean you have to sacrifice a bit now, but that’s nothing compared to the amount you’ll have to stretch your budget in retirement without proper savings.

  • The 25 times rule is one method for determining how much money you'll need to save for retirement. It's derived from a study about retirement savings withdrawal rates that found retirees typically can withdraw 4% from their portfolio each year to safely cover expenses for the rest of their lives.
  • Say you estimate you'll need $100,000 per year to fund your retirement and expect Social Security to provide $35,000 per year. That leaves $65,000 per year you need to fund through your savings. Multiply that number by 25 to get $1.63 million, which is now your target savings goal.
  • Retirees may use the 3% rule to determine how much money they can safely withdraw from their retirement accounts. A retiree following this rule would withdraw no more than 3% of the total balance during the first year of retirement, increasing the percentage each year to account for inflation.
  • Think of these rules a guide. Factors like your age, investment portfolio and health care costs can affect how much you can safely withdraw each year and have enough money to cover your expenses for the rest of your life.
  • The $1,000-a-month rule for retirement capitalizes on the power of compound interest to boost your savings. If you deposit $1,000 per month in an account earning 3% interest, the balance can grow to more than $141,000 in 10 years. Do this for 20 years, and the balance more than doubles. If you can keep up the savings pace for 30 years, you can have a comfortable nest egg with more than $585,000 to fund your retirement.

Allison Hache and Jennifer Taylor contributed to the reporting for this article.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy .

  • U.S. Department of Labor. "Top 10 Ways to Prepare for Retirement."
  • Social Security Administration. "Social Security Basic Facts."
  • Fidelity Investments. 2023. "How does a 401(k) match work?"
  • Vanguard. "Individual 401(k)."
  • IRS. 2023. "Contribution limits in a one-participant 401(k) plan."
  • IRS. 2023. "Traditional and Roth IRAs."
  • IRS. 2023. "Considering a loan from your 401(k) plan?"
  • Vanguard. "Make your savings last through retirement."
  • IRS. 2024. "401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000."
  • Social Security Administration. "Monthly Statistical Snapshot, March 2024."

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How You Can Tackle Health Care Costs in Retirement

Doctor visits and medications are only part of the challenge of health care costs — there’s also long-term care planning. Here’s what you can do.

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A stethoscope and a piggy bank.

Adequately planning for retirement is becoming a growing concern for Americans, and many worry they’ll have to be millionaires before they can stop working.

A recent study from Northwestern Mutual found that adults across the U.S. believe they will need $1.46 million to retire comfortably. That’s a 53% increase compared to the $951,000 many believed they would need back in 2020.

Unfortunately, the amount Americans actually have saved is dropping. According to the same study, the average American had $89,300 saved in 2023. That number has dropped to $88,400 in 2024. So what does this mean when it comes to long-term health care costs, and what can you do now to avoid financial stress in your golden years?

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Before you can formulate a plan to attack health care costs in retirement, it’s important to understand the federal programs in place and how much coverage they provide.

Federal programs and their coverage

Once you turn 65, you become eligible for Medicare . Medicare is a federal insurance program that is meant to help offset health care costs in retirement. Part A covers in-patient hospital stays, hospice care and some home health care. Part B covers certain doctor’s visits, outpatient care, medical supplies and preventive services. Part D helps cover the cost of prescription drugs. Although there are many parts to Medicare, it doesn’t cover everything — forcing some people to enroll in supplemental insurance programs known as Medigap plans. However, the plans may only cover a certain amount depending on how much money you have saved.

The Employee Benefit Research Institute found a 65-year-old man enrolled in a Medigap plan with average premiums will need to have $106,000 saved just to have a 50% chance of having enough to cover premiums and average prescription drug costs. That number jumps to $128,000 for women. This difference in cost is likely due to the fact that women tend to live longer than men. To have a 90% chance of covering health care costs in retirement, the average man will need $184,000 in savings; women will need $217,000. According to the CDC , the average life expectancy for women is 79; for men, it’s 73.

Based on these findings, it’s safe to say health care costs will take a decent chunk from your retirement fund — but don’t let these numbers paralyze you. There are small steps you can take now to help you become more financially secure in retirement.

1. Maintain a healthy lifestyle.

It's obvious advice, but it bears repeating. If you make an effort to stay active and eat healthy, you'll likely spend less on health care than someone who ignores diet and exercise and has other unhealthy habits such as smoking.

2. Boost your retirement savings.

Generally speaking, the sooner you start saving for retirement, the better off you’ll be. If possible, increase or max out contributions to your employee savings plan.

The IRS also allows adults over the age of 50 to make annual catch-up contributions to certain accounts:

  • 401(k). You can contribute an extra $6,000 each year.
  • 403(b). Employees with at least 15 years of service can contribute up to $6,000 annually.
  • IRA. For either a traditional IRA or Roth IRA , you can contribute up to $1,000 more each year.

3. Open a health savings account (HSA).

If your employer offers a health plan that is HSA-eligible, consider enrolling. As part of the plan, you can contribute to a health savings account ( HSA ) without a tax penalty. Your contributions are made pre-tax. As a bonus, your savings grow tax-free, and you can withdraw money tax-free as long as it is used for qualified medical expenses.

4. Consider your retirement age.

The average age of retirement is 62 for most Americans. While three extra years of retirement may sound good, there are some serious drawbacks. During those three years, you won't be able to contribute to employee-sponsored savings plans. You won't have a steady income. You also won't be eligible to enroll in Medicare until you are 65. That means you’ll be paying out of pocket for health insurance for three years.

5. Live like you are already retired.

An easy way to boost your savings is to cut back on your spending. Start by envisioning your retirement and look for costs to cut. If that vision involves downsizing your home or cooking healthy meals at home, begin making those changes now. Limit the career clothing you buy. Consider purchasing a more economical car. These changes will save you money right away. They will also make the transition into retirement easier.

Unfortunately, doctor visits and medication costs aren’t the only health care expenses you’ll need to account for. Another major factor you’ll need to consider is where you’re going to live as you age — especially if you become cognitively impaired. Data from Genworth found that in 2023 Americans could spend up to $75,504 annually for in-home care, $64,200 for assisted living care and up to $116,800 for nursing home care. Those costs alone could eat through your retirement savings in just a few years. Fortunately, there are several long-term insurance plans that can help offset these costs.

Here are some common plans:

Long-term care insurance. This type of insurance is specifically designed to cover the costs of long-term care services. Policyholders pay premiums in exchange for coverage, which can help cover home care, assisted living or nursing home care expenses.

Hybrid life insurance with long-term care rider. Some life insurance policies offer a long-term care rider, allowing policyholders to access a portion of the death benefit to cover long-term care expenses if needed. These policies provide both life insurance coverage and long-term care benefits.

Annuities with long-term care benefits. Certain annuity products include long-term care benefits that can help cover expenses if the annuitant requires long-term care. Annuities with long-term care riders may offer a lump-sum payment or monthly benefit to cover care costs.

Medicaid. Medicaid is a joint federal and state program that provides health coverage to eligible low-income individuals, including coverage for long-term care services. Eligibility criteria vary by state, but typically income and asset requirements must be met to qualify.

Employer-sponsored plans. Some employers offer long-term care insurance as part of their benefits package. These plans may provide coverage for employees and their eligible family members at group rates.

Accounting for long-term health care is a crucial part of retirement planning. There are a number of steps you can take to help grow your savings now, and there are some insurance options for covering long-term care expenses.

As you’re planning, consider your current health status, cost of care, health insurance coverage, financial resources, family support and personal preferences. Taking these factors into account can help you make an informed decision that best suits your needs.

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Joel Russo is a New Jersey native and has been in the financial services industry for more than 35 years. He is dedicated to helping his clients reap the rewards of a well-planned retirement. Unlike many financial professionals, Joel specializes in the retirement market, "the over-50 crowd” and has dedicated his practice to educating this community with workshops on topics relating to income from the right sources, taxes in retirement, RMD pitfalls and legacy planning.

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company retirement plan types

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5 Companies With the Best Retirement Plans

company retirement plan types

Today's workers—unless they've been in the workforce a very long time with the same employer or work in certain public sector or union organizations—will never know what a retirement pension , or defined benefits plan, looks like in real life. That's because these retirement plans are going the way of the dinosaur, replaced by the defined contribution plan , typically a 401(k) account.

What's the difference? A pension plan pays a guaranteed amount each month, based on salary and years of service. A 401(k) plan, on the other hand, depends on employee and sometimes employer contributions and reflects the performance of the investments within them.

While the vast majority of businesses now offer 401(k) plans for retirement, there's a great deal of difference between the most and least generous among them. For example, some employers offer a generous employer match and even additional contributions based on salary. Others offer a better mix of investment options with lower fees. It's a good idea to look at the fine print to see what you're really getting when you enroll.

If you are wondering which companies do the best job setting up their employees for financial security in retirement, take a look at our list for the best retirement plans.

1. ConocoPhillips (COP)

ConocoPhillips has a generous employee matching program—it automatically pays a 6% match after you invest 1% of your income . In addition, the company offers a discretionary additional match of between 0% and 6% based on company performance and other factors including employee age. The goal is a 9% total match.

In addition, investment options are broad, including a mix of stock , bond  and international index funds . Vesting is immediate at 100%. Enrollment is voluntary, but employees must contribute a minimum of 1% to receive the company's contributions.

2. The Boeing Company (BA)

Boeing transitioned all non- union employees from a pension to a 401(k) retirement plan in 2016, and the results have been amazing. With an estimated $60 billion in assets, it is the one largest plans in the country. The company matches 10% of the first 10% of employees' contributions, for a maximum contribution of 20%.

There was also a discretionary contribution of 2% of base and incentive pay to all eligible 401(k) participants if employed at Boeing at end of year, each year, for 2022 and 2023. Boeing automatically enrolls employees in the plan, and there is a broad selection of stock, bond, and international index funds to choose from.

3. Amgen Inc. (AMGN)

Amgen is another company with one of the best retirement plans, and is one of the more generous companies when it comes to employer contributions—it makes a 5% core contribution upfront, whether or not the employee makes a contribution to the plan.  

In addition, the company matches employees' contributions up to 5% of their salary for a total of 10%.   There's also an employee stock purchase plan .  

Amgen's funds include a broad mix of stock, bond and international index funds. Employees are 100% vested immediately and are automatically enrolled in the plan.

4. Philip Morris International Inc. (PM)

You may have qualms about working for the king of tobacco, but Philip Morris does its best to reward and retain top talent. In addition to matching the first 5% of employee contributions, the company may add an additional 7% to 15% of eligible compensation, depending on annual business rating.

There are no bond funds to select, but a broad range of stock and international index funds are available. Eligible employees are automatically enrolled and are 100% vested immediately.

5. Citigroup Inc. (C)

This banking giant does a good job with its retirement plans, matching 100% of the employee's first 6% of contributions. There's an additional 2% added in, but it's important to note that Citigroup makes its contributions in a lump sum at or after year-end and not at the same regular intervals that employee contributions are made. Fund options include stock and international index funds—no bond funds are available. Enrollment is automatic, and employees are fully vested immediately.

U.S. Bureau of Labor Statistics. " How Do Retirement Plans for Private Industry and State and Local Government Workers Compare? "

U.S. Department of Labor, Employee Benefits Security Administration. " FAQs about Retirement Plans and ERISA ." Pages 1-2.

ConocoPhillips. " ConocoPhillips Savings Plan ." Page 8.

ConocoPhillips. " ConocoPhillips Savings Plan ." Pages 8, 10.

Boeing. " Boeing Announces Future Retirement Plan Changes for Nonunion Employees ."

Pensions and Investments. " The P&I 1,000 Largest U.S. Retirement Funds: 2023 ."

Boeing. " Introducing The Boeing Company 401(k) Retirement Plan ."

Amgen. " 401(k) Plan ."

Amgen. " Employee Stock Purchase Plan ."

U.S. Securities and Exchange Commission. " Philip Morris International Inc., Form 11-K, For the Fiscal Year Ended December 31, 2021 ." Pages 10-11.

U.S. Securities and Exchange Commission. " Philip Morris International Inc., Form 11-K, For the Fiscal Year Ended December 31, 2021 ." Pages 8, 13.

Citigroup. " Citi Retirement Savings Plan Prospectus and Summary Plan Description (Effective January 1, 2024) ." Pages 1, 20-21, 28, 30.

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