Top Retirement Savings Options for a Secure Future

Although traditional retirement plans are becoming less common, it's crucial for younger individuals to prioritize saving for their future. Below are straightforward and easy-to-understand retirement savings vehicles that cater to different needs:

Employer-Sponsored 403(b)/401(k): This is one of the simplest ways to start saving for retirement. Contributions are deducted from your paycheck, and many employers offer matching funds. If you change jobs, ensure you roll over the funds into a new employer’s 401(k) or an individual IRA.

A 403(b) plan is designed for employees of nonprofits, educational institutions, and similar entities.

Solo 401(k): Self-employed individuals or sole proprietors can set up a solo 401(k), contributing as both employer and employee up to $54,000 (or $60,000 for those over 50).

SEP IRA: Ideal for small business owners and freelancers, a SEP IRA allows employer contributions up to $54,000 or 25% of income, whichever is less. It’s easier to establish than a solo 401(k), but employers with employees must contribute on their behalf if they meet certain criteria.

Simplified Employee Pension (SEP) IRA: Suitable for small firms, a SEP IRA involves minimal paperwork. Employers can contribute up to 25% of salary or $54,000 annually, supporting small business owners and freelancers.

Simple IRA: Designed for small companies with fewer than 100 employees, Simple IRAs require less administrative effort. Employers can choose to match employee contributions or make non-matching contributions, with limits around $12,500 (plus $3,000 for those over 50).

Individual Retirement Account (IRA): IRAs are popular for retirement savings. Annual contributions can be up to $6,500 (or $7,500 for those over 50). Contributions are tax-deferred or tax-free, and accounts can include a mix of investments like stocks, bonds, and mutual funds. If you lack employer-sponsored plans, you may deduct full contributions from your income, subject to income limits.