Common Types of Retirement Plans and Other Ways to Save

With so many different types of retirement plans out there, how do you know which one is right for you? Each has its own rules, benefits, and, of course, eligibility requirements—meaning you may not be eligible for every type of plan.

Ahead, we'll look at some common types of employer-sponsored retirement plans, plus a few other accounts individuals use for retirement that can be used by almost anyone.

Any size company:

• 401(k)

Government, school, or non-profit:

• Thrift Savings Plan (TSP)
• 457(b)
• 403(b)

Small business or self-employed:

• SIMPLE IRA
• SEP IRA
• Solo 401(k) (for self-employed only)

Outside of these retirement plans, three other common accounts used to save for retirement are:

• IRA
• Brokerage account
• HSA (connected with an eligible High Deductible Health Plan) while relatively new, can be a powerful tool for retirement because of its triple tax savings.

We'll explore, at a high level, the key features of each retirement plan type or account, including potential tax advantages, contribution limits, withdrawal penalties, Roth versions, and more.

A 401(k) is an employer-sponsored plan that is the most common type of retirement plan out there. Most 401(k)s share very similar features, but note that specific eligibility for your company's 401(k) plan depends on your employer's plan requirements like length of employment, age, etc. So it's best to review your summary plan description for these details.

• Tax benefits: Contributions are generally made with pre-tax dollars, so you get a tax break up front, helping lower your current income tax bill. Your 401(k) savings can potentially grow tax-deferred until you withdraw the funds in retirement. At the time of withdrawal, you pay ordinary income taxes on the pre-tax contributions and growth.
• Employer matching: Some employers provide employees with a matching contribution to their 401(k). If your employer offers a match, it means they'll deposit money into your retirement account based on the amount you put in, usually it's a percentage of the contribution you make and/or a percentage of your wages.
• High contribution limits: 401(k)s have higher contribution limits than an IRA (see below), allowing participants to set aside more money for retirement.
• Easy payroll deductions: With 401(k)s, payroll deductions are often automatic, making it easy to consistently contribute to your retirement plan.

- Annual contribution limit: $23,000 for 2024; $23,500 for 2025
- Additional catch-up contribution limit (for those age 50 and older): $7,500 for 2024 and 2025
- Super catch-up contribution limit (for qualifying individuals ages 60 to 63) starting in January 2025. Individuals can increase their catch-up contributions of up to 150% of the regular catch-up amount (currently $7,500) or $11,250 for 2025, whichever is greater.¹

A Thrift Savings Plan (TSP) is a retirement plan for the federal government's civilian employees and the military. It is the federal government's version of the 401(k).

• Tax benefits: Contributions are generally made with pre-tax dollars, so you get a tax break up front, helping lower your current income tax bill. Your TSP savings can potentially grow tax-deferred until you withdraw the funds in retirement. At the time of withdrawal, you pay ordinary income taxes on the pre-tax contributions and growth.
• Employer matching: The U.S. government will match dollar for dollar on the first 5% you contribute. For federal employees hired after 2020, you will be automatically enrolled at a 5% deferral rate to ensure that you receive the full matching contribution.
• High contribution limits: TSPs have higher contribution limits than an IRA (see below), allowing participants to set aside more money for retirement.
• Easy payroll deductions: With TSPs, payroll deductions are automatic, making it easy to consistently contribute to your retirement plan.

- Annual contribution limit: $23,000 for 2024; $23,500 for 2025
- Additional catch-up contribution limit (for those age 50 and older): $7,500 for 2024 and 2025
- Super catch-up contribution limit (for qualifying individuals ages 60 to 63) starting in January 2025. Individuals can increase their catch-up contributions of up to 150% of the regular catch-up amount (currently $7,500) or $11,250 for 2025, whichever is greater.²

A 457(b) plan is generally offered to state and local government and public service employees. They're often thought of as a supplemental way to save for retirement. Examples of workers that could potentially contribute to a 457(b) plan include state and local government employees, firefighters, police officers, non-profit hospital workers, and university workers.

• Tax benefits: Contributions are generally made with pre-tax dollars, so you get a tax break up front, helping lower your current income tax bill. Your 457(b) savings can potentially grow tax-deferred until you withdraw the funds in retirement. Generally, you pay ordinary income taxes on pre-tax contributions and growth at the time of the withdrawal. Nongovernmental plans may allow you to make distribution elections when you first contribute to avoid inadvertently taxing the entire 457(b) amount when you separate services with the employer.
• No early withdrawal penalty: One notable benefit of a 457(b) is you don't have an early withdrawal penalty if you leave your job and need to take an early distribution before age 59½. Other tax-deferred retirement plans like a traditional 401(k) or IRA have a 10% penalty if you withdraw money early, except in qualifying circumstances.
• Additional contribution limits: Governmental 457(b)s have the same basic contribution limits as 401(k)s. And, may have a special provision if you're within three years of retirement age that allows you to make additional contributions, letting you to save even more for retirement.
• Additional savings may be available: Workers may be able to simultaneously fund both a 457(b) and 403(b)/401(k), effectively giving you the ability to save even more on a tax-deferred basis.
• Easy payroll deductions: Payroll deductions are often automatic, making it an easy way to consistently contribute to your retirement plan.

- Annual contribution limit: $23,000 for 2024; $23,500 for 2025
- Additional catch-up contribution limit (for those age 50 and older) for 2024 and 2025: $7,500 or a special allowance for a larger deferral amount if allowed by the plan within three years of retirement age. Review your plan for what constitutes retirement age.
- Super catch-up contribution limit (for qualifying individuals ages 60 to 63 in governmental plans) starting in January 2025. Individuals can make catch-up contributions of up to 150% of the regular catch-up amount (currently $7,500) or $11,250, whichever is greater.³

A 403(b) plan is usually offered to nonprofit workers who have careers in nongovernment jobs, such as teachers at private or public schools, workers with 501(c)(3) charities, hospital employees, and some ministers who work for religious organizations.

• Tax benefits: Contributions are generally made with pre-tax dollars, so you get a tax break up front, helping lower your current income tax bill. Your 403(b) savings can potentially grow tax-deferred until you withdraw the funds in retirement. At the time of withdrawal, you pay ordinary income taxes on the pre-tax contributions and growth.
• Additional contribution limits: 403(b)s have the same basic contribution limits as 401(k)s, however, a few plans may offer an additional contribution amount referred to as a "15-years of service catch-up." For 403(b)s that offer a 15-year catch-up, qualified employees can make an additional contribution of up to $3,000 with a lifetime maximum of $15,000. Because of the rule's complexity, very few, if any plans, offer this benefit.
• Additional savings may be available: Some employees may be able to simultaneously fund both a 403(b) and 457(b), effectively giving you the ability to save even more on tax-deferred basis.
• Easy payroll deductions: Payroll deductions are often automatic, making it an easy way to consistently contribute to your retirement plan.

- Annual contribution limit: $23,000 for 2024; $23,500 for 2025
- Additional catch-up contribution limit (for those age 50 and older): $7,500 for 2024 and 2025
- Additional 15-years of service contribution (for those with a tenure of 15 years): Up to $3,000/year
- Super catch-up contribution limit (for qualifying individuals ages 60 to 63) starting in January 2025. Individuals can make catch-up contributions of up to 150% of the regular catch-up amount (currently $7,500) or $11,250 for 2025, whichever is greater.⁴

Saving Incentive Match Plan for Employees (SIMPLE) IRA plans are made for small businesses with 100 or fewer employees. Generally, employees who've made $5,000 in any two previous years working for the employer are eligible for the SIMPLE IRA.

• Tax benefits for the employee: Employee contributions are made with pre-tax dollars, giving employees an up-front tax break and lowering their current income tax bill. Their savings can potentially grow tax-deferred until they withdraw the funds in retirement. At the time of withdrawal, the employee pays ordinary income taxes on the pre-tax contributions and growth. However, there is a 25% penalty for withdrawals that occur within two-years of participating in a SIMPLE IRA plan if you are under age 59 ½.
• Tax benefits for the employer: Employer contributions to the employee's SIMPLE IRA are considered a tax-deductible expense for the business.
• Employer matching: Employers may match the employee's contribution up to 3% or make a 2% automatic (non-elective) retirement contribution.

- Annual employee contribution limit: Employees can contribute up to 100% of their compensation, up to a maximum of $16,000 for 2024 and $16,500 for 2025
- Catch-up contribution limit (for those age 50 and older): $3,500 for 2024 and 2025
- Super catch-up contribution limit (for qualifying individuals ages 60 to 63) starting in January 2025. Individuals can make catch-up contributions of up to 150% of the regular catch-up amount (currently $3,500) or $5,250 for 2025, whichever is greater.⁵

Simplified Employee Pension (SEP) IRAs are available to self-employed individuals, freelancers, or small businesses.

• Flexible annual contributions: Employers have the flexibility to change contribution limits yearly or even skip contributions altogether in any given year. However, when employers make a contribution, they must contribute the same percentage to all eligible employees in the SEP IRA as they do for themselves and any other business owners.
• Employer-only contributions: Typically, employees cannot contribute to this plan; rather, employers decide if and how much to contribute to the plan on behalf of eligible employees.
• Tax benefits: Employer contributions are tax deductible, allowing the employer to claim a tax deduction on any contributions they make in their employee's SEP IRA. For the employee, SEP IRA contributions and earnings can potentially grow tax-deferred until you withdraw the funds in retirement. At the time of withdrawal, you pay ordinary income taxes on distributions in retirement.

- Annual contribution limit: Employers may contribute between 0% up to 25% of each eligible employee's income, but no more than $69,000 in 2024; $70,000 per person in 2025. Each eligible employee must receive the same contribution percentage.

A solo 401(k) plan, also known as an individual 401(k), is available to self-employed individuals and owner-only businesses who want to make contributions toward their retirement savings. (If your spouse earns income from the business, they can also participate in the plan.)

• High contribution limits: Solo 401(k)s have high contribution limits when you combine the elective deferral and employer contributions. As an employee, you can contribute your entire salary as long as it doesn't exceed the annual maximum contribution. As the owner, you can make contributions as the employer up to the stated limits (see below).
• Tax benefits: Contributions are generally made with pre-tax dollars, so you get an upfront tax break, helping lower your current taxable income. Your savings can potentially grow tax-deferred until you withdraw funds in retirement. At the time of withdrawal, you pay ordinary income taxes on the pre-tax contributions and growth.
• Low cost and flexible: Solo 401(k) plans are generally a low-cost option for self-employed individuals and small business owners who want to save more for retirement. Additionally, you can direct how your contributions are invested, giving you more investing flexibility with your retirement funds.

- Annual elective deferral contribution limit (as an employee): $23,000 in 2024; $23,500 for 2025
- Additional catch-up contribution limit (for those age 50 or older): $7,500 for 2024 and 2025
- Super catch-up contribution limit (for qualifying individuals ages 60 to 63) starting in January 2025. Individuals can increase their catch-up contributions of up to 150% of the regular catch-up amount (currently $7,500) or $11,250 for 2025, whichever is greater.⁶
- Annual maximum contribution limit (both as an employee and employer): Annual profit-sharing contributions of up to 25% of your compensation or 20% of your net self-employment income. The combined limit is up to $69,000 for 2024; $70,000 for 2025
- Annual maximum contribution limit (both as an employee and employer for those 50 or older): For 2024, up to $76,500 for those who are 50 or older; for 2025, up to $77,500 for those who are 50-59 or 64 or older and up to $81,250 for those who are between 60 and 63

IRAs are available to anyone with earned income and their spouses, if married and filing jointly. Even if you're contributing to an employer-sponsored plan like a 401(k) or similar plan, you might consider adding an IRA to help boost your retirement savings.

• Tax benefits: Contributions are made with pre-tax dollars and are generally tax deductible if your income is under a certain level or if you (or your spouse) don't have an employer-sponsored plan. If you do have an employer-sponsored plan, the tax-deductible portion of your IRA contributions could be limited. Your potential earnings grow tax-deferred and you generally don't pay taxes until you withdraw the money in retirement, at which time you'll pay ordinary income tax on the withdrawals.
• No income limits for opening an IRA: There are no income limits to opening an account; however, there are contribution limits that restrict how much money you can contribute to the account.
• Range of investments: IRAs can offer a wide range of investment choices like stocks and bonds, potentially giving you more investing flexibility compared to other employer-sponsored plans.

- Annual contribution limit: $7,000 for 2024 and 2025
- Additional catch-up contribution limit (for those age 50 or older) for 2024 and 2025: $1,000

Some employer-sponsored retirement plans like the 401(k), TSP, governmental 457(b), 403(b), and the solo 401(k) offer a Roth version. With Roth versions of these retirement accounts, you make your contributions with after-tax dollars instead of pre-tax dollars. Unlike the traditional plan versions, with a Roth, you don't pay income tax on the earnings withdrawals as long as you're age 59 ½ and you initially funded the account five years ago or longer⁷. Additionally, Roth accounts are not subject to required minimum distributions (RMDs) while alive. However, withdrawals before age 59 ½, if allowed, are considered part contribution and part earnings and potentially subject to a 10% penalty.

Roth IRAs operate in a similar way, with one additional benefit: You can withdraw your contributions anytime, tax-free and without penalty. However, you can only withdraw your earnings tax- and penalty-free as long as you're at least age 59 ½ and it has been at least five years since you first contributed to a Roth IRA or you meet other conditions.⁸

See Must-Ask Questions: Roth IRA Withdrawals for additional details.

Rising health care costs is one of the most common concerns we hear from retirees. One way to save tax-efficiently for those future costs is through a health savings accounts (HSAs). HSAs are available to anyone who is enrolled in an eligible High Deductible Health Plan (HDHP). HSAs can be used to help pay for qualified medical expenses now and into the future.

• Tax benefits: Contributions are generally made with pre-tax dollars. Your savings can potentially grow tax-deferred and distributions for qualified medical expenses can be withdrawn tax-free. After age 65, you can use your HSA to pay for things other than health care. You'll owe ordinary income tax on the distribution with no other penalty—similar to withdrawals from 401(k)s and IRAs. (Note: Nonqualified withdrawals made prior to age 65 will be subject to ordinary income tax plus a 20% early withdrawal penalty.)
• No income limits for opening an HSA: There are no income limits to opening an account.
• Range of investments: Most HSAs will require a minimum amount in cash before allowing you to invest a portion of it. However, once you meet the minimum cash threshold, you typically can have access to the investment choices offered by your HSA provider.
• Keep it wherever you go: HSAs are "portable." Even if you separate services from your employer, you get to keep the HSA. Dollars in an HSA don't have to be used each year and can left in the account to potentially grow over time. HSAs are also not subject to the RMD like other retirement accounts.

- Annual contribution limit: Individuals are $4,150 for 2024 and $4,300 for 2025 (Families are $8,300 in 2024 and $8,550 for 2025)
- Additional catch-up contribution limit (for those age 55 or older): $1,000

A brokerage account is used for general saving and investing. It can be used by anyone for a variety of goals. Consequently, it's a very common account used for retirement.

• Tax benefits: Any gain on investments held for more than one year and qualified dividends are taxed at preferred taxed rates that are less than ordinary income tax. If investments are sold at a loss, you can offset other capital gain or if your capital loss exceeds your capital gain, you can deduct up to $3,000 of that loss against ordinary income. Any additional loss can be carried forward.
• No income or contribution limits: Generally, there are no income or contribution limits to opening an account.
• Easy access to funds: Funds in a brokerage account can be accessed relatively quickly. Unlike most employer-sponsored retirement plans that limit access to funds while working or have a penalty for early withdrawal, there is no such restriction or age-related penalty for withdrawing funds from a brokerage account.
• No required minimum distribution (RMD) requirements: Tax-advantaged accounts usually have a RMD requirement, but that's not the case for a brokerage account.
• Range of investments: Brokerage accounts offer a wide range of investment choices like stocks and bonds, potentially giving you more investing flexibility compared to other employer-sponsored plans.

Investors have many ways to save for retirement. Consider asking your employer about the types of retirement savings plans available, or if you own your business, consider a small business retirement plan that may fit your goals. Additionally, you may want to add to an HSA if you have an eligible HDHP, (Roth) IRA, and a brokerage account to supplement your retirement savings. Above all, don't delay. You can always adjust your plan along the way. Remember, the earlier you start to save, the more likely you can reach your retirement goals.

^1,2,3,4,5,6Indexed to inflation beginning in 2026.

⁷Each Designated Roth account you own from different employers has its own five-year holding period requirement.

⁸If you take a distribution of Roth IRA earnings before you reach age 59½ and it has been less than five years since you initially funded a Roth IRA, the earnings may be subject to taxes and penalties. You may be able to avoid penalties (but not taxes) in certain situations. If you're older than 59½ but haven't met the five-year holding requirement, your earnings may be subject to taxes but not penalties. Note that the first contribution to any Roth IRA starts the 5-year holding period for all your Roth IRAs. Consult IRS rules before contributing to or withdrawing money from a Roth IRA.