When planning for the future, understanding the various types of retirement accounts is a foundational step. These accounts offer different tax advantages, contribution limits, and withdrawal rules, which can influence how and when you save. Whether you’re employed by a company, self-employed, or simply looking to put more away for the long term, there are several options to explore.
This guide highlights the most common retirement account types, their key features, and how they compare to one another.
Employer-Sponsored Retirement Accounts
Employer-sponsored plans are offered through your workplace and often include contribution incentives.
- 401(k): Offered by private-sector employers, a 401(k) allows employees to contribute pre-tax income. Many employers offer matching contributions, which may increase your savings rate over time.
- 403(b): Similar to a 401(k), but designed for employees of public schools, nonprofits, and certain religious organizations.
- 457(b): Available to some government and nonprofit employees. These plans may offer more flexible early withdrawal rules compared to 401(k)s or 403(b)s1.
One of the advantages of these three types of accounts is that contributions are often deducted directly from your paycheck, making the process automatic and consistent.
Individual Retirement Accounts (IRAs)
IRAs are designed for individuals who want to save independently or supplement their employer-sponsored plans. There are two main types:
- Traditional IRA: Contributions may be tax-deductible depending on your income and other retirement plans. Earnings grow tax-deferred, but withdrawals in retirement are taxed as income.
- Roth IRA: Contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free. Roth IRAs also have no required minimum distributions (RMDs) during the original owner’s lifetime.
Eligibility to contribute to a Roth IRA phases out at higher income levels, so it’s important to check check current IRS thresholds if considering this option2.
Self-Employed and Small Business Retirement Plans
For those who work for themselves or run small businesses, several retirement plans provide opportunities to save and invest in a tax-advantaged way.
- Solo 401(k): Designed for self-employed individuals with no employees (except possibly a spouse). These accounts allow both employee and employer contributions, offering higher total limits.
- SEP IRA (Simplified Employee Pension): Offers a simple way for business owners to contribute to retirement accounts for themselves and their employees. Contributions are made by the employer only.
- SIMPLE IRA (Savings Incentive Match Plan for Employees): Intended for small businesses with fewer than 100 employees. Allows both employer and employee contributions and has simpler administrative requirements than a 401(k).
These accounts can be effective for those looking to maximize their retirement contributions while managing a business.
Comparing Retirement Accounts
To better understand how these accounts differ, here’s a comparison table with key features:
| Account Type | Eligibility | Tax Treatment | Contribution Limits (2025) | Required Minimum Distributions (RMDs) |
| 401(k) | Employees of private companies | Pre-tax contributions; taxed on withdrawal | $23,000 (plus $7,500 catch-up if 50+)3 | Yes |
| Roth 401(k) | Offered by some employers | After-tax contributions; tax-free withdrawals | $23,000 (plus catch-up)4 | Yes |
| Traditional IRA | Anyone with earned income | Pre-tax (if eligible); taxed on withdrawal | $7,000 (plus $1,000 catch-up)5 | Yes |
| Roth IRA | Income limits apply | After-tax; tax-free withdrawals | $7,000 (plus catch-up)6 | No |
| SEP IRA | Self-employed or small business | Employer-funded; tax-deferred | Up to 25% of compensation or $69,0007 | Yes |
| SIMPLE IRA | Small businesses (under 100 employees) | Pre-tax; taxed on withdrawal | $16,000 (plus $3,500 catch-up)8 | Yes |
| Solo 401(k) | Self-employed with no employees | Pre-tax or Roth options available | Up to $69,000 total (employee + employer)9 | Yes |
Note: Limits and rules are subject to change based on IRS guidelines.
Other Account Types to Consider
In addition to the more commonly used accounts above, here are a few others that may apply in specific circumstances:
- HSA (Health Savings Account): While not technically a retirement account, HSAs offer tax advantages and can be used in retirement for qualified medical expenses9.
- Defined Benefit Plans: These are traditional pensions where retirement income is calculated based on a formula. They are offered by some employers, especially in government roles.
- Nonqualified Deferred Compensation Plans (NQDCs): Offered by some employers to high-income earners, these plans defer income and taxes until a future date, typically retirement.
Key Considerations Before Choosing
Before selecting a retirement account type—or combination of types—it’s helpful to think through:
- Your current employment status and whether your employer offers a plan
- Whether you’re self-employed or own a business
- Your income level and tax bracket now vs. what you expect in retirement
- Whether you prefer tax benefits now
- How much flexibility you want with contributions and withdrawals
Here’s a quick checklist of questions to keep in mind:
- Do I have access to an employer-sponsored plan?
- What is my current tax bracket?
- Am I eligible to contribute to a Roth IRA?
- How much do I want to contribute to any of these options per year?
- Will I want to access my funds early, or keep them invested long-term?
Thinking through these questions can help you align your retirement savings with your long-term goals.
Contact us today to learn how we can help you live retirement boldly and on your terms.
Citations:
- 401kSpecialistMag.com, June 18, 2021
- IRS.gov, March 22, 2025
- IRS.gov, March 22, 2025
- IRS.gov, March 22, 2025
- IRS.gov, March 22, 2025
- IRS.gov, March 22, 2025
- IRS.gov, March 22, 2025
- IRS.gov, March 22, 2025
- IRS.gov, March 22, 2025
Investment advisory services are offered through Vantage Point Financial, a registered investment adviser. Registration with any regulatory body does not imply any particular level of skill. This material is provided for informational purposes only and should not be construed as investment, tax, or legal advice. Working with a financial planner does not ensure financial success or prevent loss. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. The scenarios presented are hypothetical and are intended for illustrative purposes only. They do not reflect actual client results and are not guarantees of future outcomes. Individual results will vary. Certain financial strategies may offer tax advantages, but outcomes depend on individual circumstances and are subject to change due to tax laws and other external factors. Vantage Point Financial does not provide legal or tax advice. Consult a tax professional. Retirement outcomes depend on a variety of factors, including individual savings behavior, market performance, health events, and other considerations. Certain statements herein may reflect the firm’s current views, expectations, or beliefs, which are subject to change without notice. For additional information about our services, fees, and disclosures, please refer to our Form ADV Part 2A, available at https://vantage-point.mwdevsite.com or upon request at no cost.
