Which Retirement Account is Best for You?

This is an excerpt from our eBook, Retirement: Finding the Right Path to Your Next Big Adventure. Get the full eBook for FREE. Download here.

Ensuring that you have a plan for your retirement that you’re able to carry out is one of the best things you can do for yourself, for your family, and for your future. However, it can definitely feel overwhelming at times trying to shoulder this responsibility. Are you simply crossing your fingers that your retirement is on track and hoping for the best? If you’re unsure of your strategy, schedule a meeting with a financial advisor as soon as possible! The truth is, if you’re out of school and getting a paycheck, you want to be contributing to a retirement account—no matter how young you are. The sooner you start saving, the sooner you’ll be able to comfortably retire.

If you’re already saving, great! You’re on the road to a happy future. But consider this - have you reviewed your 401(k) or IRA lately? It’s possible that the plan you chose 5 years (or more!) ago isn’t the best option for you now. So what retirement options do you have and how do you know which one will work best for you and your goals? Did you know that there are various options to choose from when it comes to retirement?

Here’s an overview of the numerous ways to grow your nest egg:

Employer-sponsored 401(k)

Arguably the most popular, contributing to a 401(k) plan is one of the easiest ways to set aside pre-tax dollars for retirement. The amount you set aside for retirement is automatically taken out of your paycheck and transferred to your retirement account, allowing you to save for the future while benefiting from tax breaks. It’s particularly appealing if your employer offers a company match—free money! Each plan has a range of options to consider, including how to diversify your investments and the level of risk assumed with each portfolio. Talk to your manager or HR supervisor to see which retirement options your employer might offer.

SEP or Simple IRA

Primarily used by self-employed workers and small business owners, these accounts are fairly easy to set up, require less paperwork, and may necessitate a business contribution for those who meet certain requirements. They provide a simple way for business owners to provide retirement benefits, both for themselves and for their employees, and are a great option if you’re looking to cut back on taxes and take care of your employees.

The financial experts of Mountain America Credit Union say, “Ensuring you have everything in place for your business and your employees is crucial to your success as a business owner. Give yourself some peace of mind by getting everything set up and squared away for your employee’s retirement benefits as early as possible.”

Traditional IRA

Available to anyone under the age of 70.5 earning taxable income, this money grows tax-deferred, meaning you’re able to put pre-tax income in a traditional IRA account to save more effectively. Contributions are tax deductible while withdrawals in retirement are taxed at normal income tax rates. Since there are no income limits, you can contribute to a 401(k) at the same time, but deductions may differ depending on your salary. Distributions are required after age 70. People often ask if a traditional IRA is the same as a 401(k), and the answer is no. A traditional IRA is an individual retirement account, and a 401(k) is exclusively a type of retirement provided by an employer. Both are wonderful options when considering how to save up for retirement, but they are not the same.

Roth IRA

Available to anyone earning taxable income, regardless of age, contributions to a Roth IRA are made on an after-tax basis. So earnings and withdrawals are tax-free, subject to certain requirements. While income limits do apply, there are no 70.5 mandatory distribution requirements. This is a great option if you’re nervous about your taxes being higher during retirement, so if that’s on your mind, a Roth IRA might be a good option for you. Keep in mind that there is an income cap on Roth IRA accounts, so if you make too much money you can’t contribute to one.

There are other ways you can save up for retirement as well. Choose from mutual funds, annuities, or individual stocks and bonds to help you work toward your retirement goals individually or in conjunction with other savings options. We understand that it can be confusing at times to navigate the many choices. We recommend seeking assistance from a financial advisor to get everything going for your retirement accounts. Your financial advisor has the knowledge to help you sort through the potential benefits and limitations of each investment option and portfolio strategy.

No matter what your goals are for the future, it is never too early to start preparing for your retirement. Take some time to consider all of your options for retirement saving and planning and choose the one that will work best for you and your individual needs. Wanting some help to navigate the waters of retirement planning? Get in contact with a financial advisor and start saving today!

Interested in more on retirement?

Download our eBook, Finding the Right Path to Your Next Big Adventure. Learn more about:

• What questions you should be asking.


• Why it’s so important to start early.


• What to do if you’re starting later in life.


• How to plan for emergencies.


• How to manage your retirement income.

Download my eBook