Established in 1978, the 401(k) plan has become the most popular 澳洲幸运5官方开奖结果体彩网:employer-sponsored retirement plan in the U.S. However, not everyone has access to a 401(k) plan. According to the 24th Annual Survey from the Transamerica Center for Retirement Studies released in 2024, only 81% of full-time workers have access to a 401(k) or a similar plan from their employer. If you don't have access to such a plan, there are other options to maximize your retirement savings.

Understanding 401(k) Plans

With a 401(k), you contribute pretax money from your paycheck. The money is automatically deducted from your pay and invested in the plan. Many employers match a percentage of your contributions, and you benefit from this investment when you retire.

In 2024, the 401(k) contribution limit is $23,000, rising to $23,500 in 2025. For those age 50 or older, an additional catch-up contribution of $7,500 is allowed in 2024 and 2025. Beginning in the tax year 2025, the 澳洲幸运5官方开奖结果体彩网:SECURE 2.0 Act of 2022 substantially increases catch-up limits for 401(k) plan participants aged 60 to 63 to $11,250.

Contributions to a 401(k) can be revised as needed if your salary or circumstances change. Some employers allow a percentage of income withdrawn from an employee's pay period, which can help to increase savings as your salary increases.

Individual Retirement Accounts

Any adult with income can open an individual retirement account (IRA). These accounts also offer tax advantages, which differ depending on whether you choose a 澳洲幸运5官方开奖结果体彩网:traditional or Roth IRA.

With an IRA, you can invest in various securities or financial instruments. "The IRA is a great investment vehicle. However, more than 85% of investors aren't aware of all the benefits that an IRA provides.

It allows you to invest in stocks, bonds, and mutual funds, but it al📖so allows you to invest in real estate, horses, private company stock, tax liens, farmland, cryptocurrency, franchises, physical gold, and more," says , wealth manager at Innovative Advisory Group in Lexington, Massachusetts.

You can also choose an IRA in addition to a 401(k), but your income and the type of account you choose will determine if your contributions may be tax-deductible. The money in all of your accounts will still grow tax-free until retirement.

IRA and 401(k) contribution limits differ. With an IRA, the most you can contribute in 2024 and 2025 is $7,000 or $8,000 if you are 50 or older. In 2024, the $1,000 澳洲幸运5官方开奖结果体彩网:catch-up contribution for savers age 50 and above was indexed to the IRS 澳洲幸运5官方开奖结果体彩网:cost-of-living-adjustment (COLA) to account for inflation.

Traditional IRA vs. Roth IRA

Like 401(k)s, IRAs have both traditional and Roth versions and vary based on taxes paid now or taxes deferred. When deciding between a traditional or Roth IRA, investors often consider whether they will be in a higher tax bracket once they retire and if the tax brackets in the future mimic their bracket t𒁃oday.

A traditional IRA deducts the contributions from your taxes today, and you only pay income taxes when you make withdrawals, typically at age 59½ or later. Traditional IRAs require required minimum distributions (RMDs) beginning at age 73, with the age requirement increasing to 75 in 2033.

With a Roth IRA, you contribute after-tax money now, so once you start withdrawing, your retirement income—both earnings and your investment—is tax-free. Roth IRAs do not have a provision for required minimum distributions.

SEP IRAs

If you are self-employed or a small business owner, you may have the option to open a 澳洲幸运5官方开奖结果体彩网:simplified employee pens🌜ion (SEP) IRA. SEP IRAs operate like traditional IRAs in terms of tax advantages and investment options. They have the additional benefit of higher contribution limits. Contributions cannot exceed 25% of compensation for the year or $69,000 in 2024 and $70,000 in 2025, whichever is less.

Additional Retirement Saving Options

Cash-Balance Defined-Benefit Plan

A 澳洲幸运5官方开奖结果体彩网:cash-balance defined-benefit plan implements a type of retirement catch-up for employers. Like a traditional pension plan, a 澳洲幸运5官方开奖结果体彩网:cash balance plan provides workers with the option of a lifetime annuity. However, cash balance plans create an individual account for each covered employee with a specified lump sum. For 2024, the annual benefit allowed under a defined benefit plan is $275,000, and $280,000 in 2025.

Investment Accounts

You can open an account at your preferred financial institution and contribute as much as you want to s♏ave for retirement. If choosing security or bond instruments, any gains from appreciation or dividends will be taxed as long-term capital gains if investments are held for more than one year. Supplementing a retirement account with a taxable account invested in a stock fund or bond fund allocation may add to your financial plan but will require planning and self-management.

The Bottom Line

The 401(k) plan has become the most popular employer-sponsored retirement plan in the U.S. While not all employers offer access to a 401(k) plan, there are other options to maximize retirement savings, such as traditional IRAs, Roth IRAs, and personal investment accounts.