Choosing The Best Retirement Plan For You

Joseph Meyer
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Individual Retirement Accounts (IRAs)

or Employer Retirement Plans?!

There are a few different types of retirement plans which vary in the tax benefits that they offer. The three most popular types of retirement plans are Individual Retirement Accounts (IRAs), Traditional Employer-sponsored Retirement Plans, and the Roth IRA.

Traditional Pensions – Defined Benefit Contribution Plans

One of the challenges faced by many retirees is the ever-growing gap between what they own and what they owe. Traditional pension plans were very common in workplaces for most of the 20th century. However, they are gradually becoming a thing of the past as fewer companies are offering them. This has left many individuals with futures that are less secure than before.

If you are working, chances are you will need to arrange your own retirement plans. In most cases, this means learning about and investing in features and benefits that may not have been fully described to you in the past.

In short, traditional pensions are no longer sufficient for many consumers. If you are thinking about retirement, you need to take action and discover the right retirement plan for you.

Employer Sponsored Defined Contribution Plans – 401(k), 403(b), 457, TSP

After you retire you’re going to wind up spending at least part of your time staring at a 401(k) statement. So let’s make sure you know exactly what you’re looking at.

Defined contribution plans, like 401(k)s, 403(b)s, and 457s, pool employee contributions and invest them so they may earn money on them over time. Any money contributed by an employer is essentially matched by that employer. A defined contribution plan also sets a limit as to how much it can contribute to the employee’s account within a given year.

Defined benefit plans, like a traditional pension, provide a guaranteed level of income based on years of service and average salary.

A defined contribution plan does not provide any income guarantees to employees. That can be a positive feature: defined contribution plans can be altered in response to market conditions or need to improve employee participation. But there’s a drawback as well. Your account balance might not be adequate if you’re planning on a long and prosperous retirement.

Self-Employed Retirement Plans – Solo 401(k), SEP IRA, Simple IRA

If you have a self-employed business, you may be missing out on big tax savings. Why? Because many of the most attractive retirement plan benefits are available to sole proprietors and their business partners, but may be difficult to set up and maintain. Three of the most popular types are the

Simple IRA

While each type of plan has its own advantages, many individuals find that the Solo 401(k) is the most effortless to set up and administer. Let’s take a closer look at these three self-employed retirement plans and how they compare.