401(k) plans: Many employers provide 401(k) plans where employees contribute a pre-tax portion of their paycheck. Employers may also match contributions, helping employees grow their savings while lowering their taxable income.
Roth IRA: A Roth IRA allows you to contribute after-tax income, and in return, you won’t owe any taxes on the earnings when you make withdrawals. Roth IRAs are best suited for individuals who expect to be in a higher tax bracket in retirement, as they pay taxes upfront at their current rate. This account is also ideal for those who want more flexibility, as there are no required minimum distributions (RMDs) during retirement.
Traditional IRA: This account is similar to a 401(k) in that contributions are tax-deductible, but you’ll pay taxes on the withdrawals in retirement. This type of account is ideal for individuals who expect to be in a lower tax bracket when they retire, and are a good choice for those who want to reduce their taxable income now and can’t access a 401(k) plan through their employer.
Solo 401(k): Also known as an individual 401(k), is designed for self-employed individuals or business owners with no employees. It offers the same benefits as a regular 401(k), with higher contribution limits because you can contribute both as the employee and the employer. This is an excellent option for freelancers, contractors, or small business owners who want to maximize their retirement contributions.
SEP IRAs: This simplified employee pension plan is typically used by small business owners and self-employed individuals. It allows employers to make tax-deductible contributions to their employees’ accounts. Self-employed individuals can also contribute up to 25% of their income. SEP IRAs are a great choice for business owners looking for a simple, tax-advantaged retirement savings plan.