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Retirement Savings Strategies Are Changing: What to Know


A workplace 401(k) retirement savings plan is becoming a requirement for more and more employees, according to a new survey from Charles Schwab, with 88% saying their employer must offer a plan and 75% saying they’d turn down any job offer that didn’t include a 401(k). But as important as 401(k)s and similar tax-advantaged plans have become, a growing number of workers are expanding their investment options to include accounts that are entirely their own.

A financial advisor can help you develop – or update – a retirement savings strategy that fits your goals, risk profile and timeline.

How Habits Around Retirement Accounts and Strategies Are Changing

According to Schwab’s 401(k) Participant Survey 2023, more workers are putting money away in savings accounts, their own individual retirement accounts (IRAs) and their own brokerage accounts compared to a year earlier. Here’s a breakdown:

Savings accounts

  • 2023: 68%
  • 2022: 61%

Individual retirement accounts

  • 2023: 47%
  • 2022: 33%

Brokerage accounts

  • 2023: 38%
  • 2022: 29%

Each one of the different types of accounts seeing increased activity can offer a good way to diversify savings and investments to reach your retirement savings goals.

In addition, Schwab’s study also found decreased use of two savings vehicles: health savings accounts, down to 36% in 2023 from 44% in 2022; and cryptocurrency, down to 14% from 25% in 2022.

How to Utilize These Accounts to Save for Retirement

Senior Asian couple discussing their retirement savings plan with their financial advisor.

Savings Accounts

Savings and money market accounts are perfect places to stash cash that will be needed on short notice, for short-term living expenses, or to safely and temporarily park money for other uses. For example, money in an emergency or rainy day fund needs to be liquid, so it can be accessed right away when misfortune strikes, such as a natural disaster or other sudden crisis.

Savings accounts are insured by federal and state agencies for up to $250,000 per individual at each member institution. You can open a savings account at a local bank, but online banks often pay better rates of interest, going as high as 5.06% in early August, compared with an average of 0.42% for other banks. These accounts aren’t good for long-term investments because of the limited gains available.

IRAs: Individual Retirement Accounts

As the name says, these accounts are designed for retirement investments where money can be regularly and consistently invested for long-term goals. IRAs typically are invested in stocks and bonds, either through mutual funds or exchange-traded funds. They can also hold individual stocks and bonds and can be structured for alternative investments, as well.

A traditional IRA allows most investors to contribute pretax money, while any money withdrawn in retirement is fully taxed. Contributions to a Roth IRA are made with after-tax dollars and only gains are untaxed for retirement withdrawals. For 2023, your total contributions to all IRAs is $6,500 ($7,500 if you’re 50 or older). Most workers can contribute to both an IRA and a 401(k) at the same time.
With an IRA, investors are free to choose their own investments, while 401(k)s typically offer a limited menu of mutual funds.

Taxable Brokerage Accounts

An investment account opened at a brokerage firm allows investments in a broad range of stocks, bonds, mutual funds, exchange-traded funds (ETFs), commodities and many other securities. Anyone can open an account with after-tax dollars, and any gains are subject to capital gains taxes.

A brokerage account offers maximum flexibility and fewer restrictions than retirement accounts and can be a good option for investors who’ve maxed out their 401(k) and IRA contributions. Gains in a brokerage account that are held for more than one year are taxed at the lower capital gains rate, which ranges from 0% to 20%, depending on your tax bracket, while earnings from retirement accounts are taxed at the higher rate for normal taxable income.

Bottom Line

Young couple getting  jump start on their retirement savings

As important as Social Security and employer-sponsored retirement accounts are, a growing percentage of workers are putting money in savings accounts, individual retirement accounts (IRAs) and their own brokerage accounts. Such an approach gives investors flexibility to reach their financial goals, work around contribution limits and to draw retirement money from a combination of taxable, tax-deferred and nontaxable assets that can reduce taxes when making retirement withdrawals.

Retirement Savings Tips

  • A financial advisor can help you save for retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • SmartAsset’s retirement calculator can help you plan ahead for your retired life.

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