Your choice of account depends heavily on your finances and tax rates. Workplace retirement options like 401(k)s and IRAs use pretax contributions with tax-deferred or tax-free withdrawals at retirement time.

Other investment accounts utilize post-tax funds and will incur taxes upon withdrawal. Your optimal choice will depend upon your financial goals, timeline for retirement and risk appetite.

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401(k) plans offer tax benefits that encourage savers to meet their savings goals. Employees contribute money pretax, which lowers their taxable income for the year; investments grow tax-deferred until withdrawal at retirement – when taxes will apply at ordinary income rates.

Many 401(k) providers provide at least three investment options, such as company stocks and mutual funds, with some also offering target-date funds that change their portfolio to become more conservative as an individual approaches retirement.

Self-employed workers can create their own retirement accounts such as SEP IRAs or solo 401(k). These plans generally require less maintenance than employer-administered plans and offer higher contribution limits, plus the possibility for profits sharing and diversifying investments.


Individual Retirement Accounts (IRAs) are savings vehicles designed to help you invest money for retirement. Available from various financial institutions and offering various forms, IRAs come with their own rules, contribution limits and tax benefits – so be sure to shop around until you find one with optimal fees and investment options; look out for companies offering low management fees with educational resources if you plan to actively manage your investing strategy.

Depending on the type of IRA you select, you may be able to defer taxes on investments until retirement when they’re withdrawn, thus lowering your current tax burden while providing greater control over how to spend your money. Unfortunately, withdrawals must still pay taxes when taken out – potentially creating higher tax bills in future years.


The 403(b) plan is commonly offered by employers of government agencies, nonprofits and educational institutions. Like its 401(k) counterpart, contributions are made via payroll deduction and excluded from income taxes.

Though 403(b) plans offer less extensive investment options than their 401(k) counterparts, you should still maximize their benefits whenever possible. Some employers provide matching contributions which provide an instant 100% return; take full advantage of any matching contribution opportunities provided by your employer as much as possible.

As with 401(k)s, 403(b)s offer low-cost bond and stock funds that you can select. Target-date mutual funds should be prioritized when considering selection for these accounts as they adjust as your retirement approaches. Once you leave an employer at age 55 or later you are free to withdraw money without penalty but must pay ordinary income tax on it as income – however it could still be possible to roll your 403(b) balance into an IRA or another tax-advantaged account if desired.


Pension plans provide more than just savings accounts: they’re also retirement income streams that provide regular payments throughout your life, such as those offered through public-sector employers who have promised you one as payment for service rendered.

Investments made into defined-benefit pension plans tend to be tax-exempt, which helps lower both your current tax liability and help put you into a lower tax bracket in retirement. Many financial experts advise allocating a significant portion of pre-tax earnings towards these accounts.

Thrift Savings Plans (TSP), similar to 401(k), for federal workers and members of uniformed services can help lower tax burden. When considering lump-sum distribution from defined-benefit pension plans, taxes could become more burdensome on an increasing portion of payout.

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