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Key points

  • American workers have no shortage of options for selecting the best retirement plan.
  • Most people are eligible for more than one retirement plan.
  • 2024 retirement plans generally offer tax advantages. 

Retirement is the end goal for most workers, but you can’t quit your job unless you have a source of income. While Social Security will pay for some expenses, the government says these benefits will cover only about 40% of your pre-retirement income.

In the past, many companies offered pensions that provided lifetime income to loyal employees. Now, pensions have all but disappeared, and most workers need to rely on their savings to fill gaps in their budgets.

Fortunately, several retirement plans are available, many of which offer attractive tax incentives or generous employer matches.

Best retirement plans of 2024

American workers have no shortage of options for selecting the best retirement plan.

“You’re talking about an embarrassment of riches,” says Andrew Meadows, senior vice president of HR, brand and culture for Ubiquity Retirement + Savings, a 401(k) provider.

Plans exist for employees, self-employed individuals and small-business owners. Options within each category allow people to receive immediate tax deductions or set aside money for tax-free withdrawals in the future. The best retirement plans also offer various investment options with low fees. 

Employer-sponsored retirement plans

Employer-sponsored retirement plans are some of the best-known options, and if you are an employee — meaning you receive a W-2 at tax time — you likely have access to one of them.

These accounts can be a convenient way to save for retirement since payroll deductions fund them. Plus, many employers match a portion of employee contributions.

“You want to be sure you put enough in to qualify for whatever your employer is matching,” says Stuart Chamberlin, founder and owner of advisory firm Chamberlin Financial in Boca Raton, Florida.

Traditional 401(k)

Traditional 401(k)s are the most common retirement plans private companies offer employees.

Employee contributions to a traditional 401(k) are tax-deductible. You can access the money without penalty once you reach age 59½, and withdrawals are taxed as regular income. You must start taking required minimum distributions at age 73, meaning you cannot avoid taxes forever.

You can contribute up to $23,000 to a 401(k) plan in 2024. Savers age 50 or older can contribute an additional $7,500.

Roth 401(k)

A Roth 401(k) works like a traditional 401(k), except the tax benefits are different.

Because Roth accounts are funded with after-tax dollars, employee contributions are not tax-deductible. The benefit is that the money grows tax-free and can be withdrawn tax-free in retirement. If you make a withdrawal before age 59½ and before you have held the account for five years, some of it may be subject to income tax and a penalty.

Roth 401(k) contribution limits are the same as traditional 401(k) contribution limits.

403(b)

A 403(b), also known as a tax-sheltered annuity, works like a 401(k) and may be offered in traditional and Roth versions. Typically, 403(b) plans are available to employees of public schools and certain tax-exempt organizations.

One unique provision of 403(b) plans is that workers with at least 15 years of service can make additional catch-up contributions, which may be worth up to $3,000. 

457(b) 

Employees of state and local governments and certain tax-exempt nongovernmental entities may be able to contribute to 457(b) plans. These accounts work like 401(k)s and can be found in traditional and Roth varieties.

Like 403(b)s, 457(b)s have a unique catch-up feature. Workers may be able to contribute up to twice the annual employee limit during the last three years before their normal retirement age. 

Thrift savings plan

The thrift savings plan is a retirement plan for federal government employees and uniformed members of the armed forces. It is comparable to a 401(k) account, with similar provisions and contribution limits. 

Employer-sponsored retirement plans

PLANELIGIBILITY2024 CONTRIBUTION LIMITSBENEFITS
Traditional 401(k)
Nongovernmental employers
Governments with plans established before May 1986
Employee contribution: $23,000
Catch-up contribution for employees age 50 or older: $7,500
Total employer and employee contribution: $69,000 plus catch-up contributions
Contributions are tax-deductible
Employers may match contributions
Convenient payroll deductions
Roth 401(k)
Nongovernmental employers
Governments with plans established before May 1986
Employee contribution: $23,000
Catch-up contribution for employees age 50 or older: $7,500
Total employer and employee contribution: $69,000 plus catch-up contributions
Withdrawals are tax- and penalty-free, provided the five-year rule has been met and you have reached age 59½
Employers may match contributions
Convenient payroll deductions
403(b)
Public education employers
501(c)(3) organizations
Employee contribution: $23,000
Catch-up contribution for employees age 50 or older: $7,500
Catch-up contribution for employees with 15 years of service: up to $3,000
Total employer and employee contribution: $69,000 plus catch-up contributions
Traditional accounts: tax-deductible contributions
Roth accounts: tax- and penalty-free withdrawals provided the five-year rule has been met and you have reached age 59½
Employers may match contributions
Convenient payroll deductions
Extra catch-up contributions may be allowed
457(b)
State and local governments
Tax-exempt employers
Employee contribution: $23,000
Catch-up contribution for employees age 50 or older: $7,500
Catch-up contribution for employees during the last three years before their normal retirement age: up to twice the annual employee limit
Total employer and employee contribution: $69,000 plus catch-up contributions
Traditional accounts: tax-deductible contributions
Roth accounts: tax- and penalty-free withdrawals provided the five-year rule has been met and you have reached age 59½
Employers may match contributions
Convenient payroll deductions
Extra catch-up contributions may be allowed
Thrift savings plan
The federal government
Employee contribution: $23,000
Catch-up contribution for employees age 50 or older: $7,500
Total employer and employee contribution: $69,000 plus catch-up contributions
Traditional accounts: tax-deductible contributions
Roth accounts: tax- and penalty-free withdrawals provided the five-year rule has been met and you have reached age 59½
Employers may match contributions
Convenient payroll deductions

Individual retirement plans

Individual retirement arrangements, or IRAs, “have the lowest barrier to entry,” Meadows says.

You generally can open an IRA as long as you have earned income, even if you have a 401(k) plan or another workplace retirement account. But note that income limits may apply to deducting traditional IRA contributions and contributing to Roth IRAs.

Traditional IRA

Like a traditional 401(k), a traditional IRA offers an immediate tax deduction on contributions. Withdrawals after age 59½ are subject to regular income tax. Early withdrawals are subject to income tax and a 10% penalty. Required minimum distributions must begin at age 73.

You can contribute up to $7,000 to IRAs in 2024. Savers age 50 or older may make an additional $1,000 in catch-up contributions.

Your contributions may not be tax-deductible if you or your spouse is covered by a retirement plan at work and you exceed certain income limits. For 2024, the ability to deduct contributions begins to phase out at modified adjusted gross incomes above $77,000 for single filers and $123,000 for married couples filing jointly.

Roth IRA

Roth IRAs don’t offer tax deductions on contributions, but withdrawals in retirement are generally tax-free. Further, because you’ve already paid taxes on your Roth IRA contributions, you can withdraw them anytime tax- and penalty-free. Early withdrawals of your earnings may be subject to income tax and a 10% penalty. 

Roth IRAs share the same contribution limits as traditional IRAs, but high earners are excluded from funding these plans. For 2024, the ability to contribute to a Roth IRA begins to phase out at MAGIs of $146,000 for single filers and $230,000 for married couples filing jointly. At incomes of $161,000 and $240,000, respectively, the opportunity to contribute to a Roth IRA is eliminated.  

Spousal IRA

A spousal IRA refers to the ability of a working spouse to open an IRA on behalf of a nonworking spouse. In this way, stay-at-home parents or other spouses without earned income can have their own IRAs with which to save for retirement.

Spousal IRAs can be traditional or Roth accounts and are subject to the same contribution and income limits as other IRAs. To open a spousal IRA, a couple must file their tax return jointly.

Rollover IRA 

A rollover IRA is a way to move money from one retirement account to another. For example, if you leave a job, you can roll over money from your 401(k) to an IRA rather than leave it in place.

You can opt for a direct rollover or an indirect rollover. With a direct rollover, the funds are transferred from the 401(k) administrator to the IRA administrator. With an indirect rollover, you receive a distribution from the 401(k) and then deposit the funds into the IRA. If you fail to deposit the full amount into the IRA within 60 days, it may be subject to both income taxes and a 10% penalty.

There is no limit on how much you can roll over. Note that rolling over into an account with a different tax treatment — from a traditional to a Roth, for instance — counts as a conversion and has tax implications.

Individual retirement plans

PLANELIGIBILITY2024 CONTRIBUTION LIMITSBENEFITS
Traditional IRA
Anyone
For those with access to a workplace retirement plan, the ability to deduct contributions begins to phase out at MAGIs above $77,000 for single taxpayers and $123,000 for married couples filing jointly
$7,000
An additional $1,000 in catch-up contributions for those age 50 or older
Contributions are fully deductible for those without access to a workplace retirement plan
Portable retirement plan not connected to an employer
May have more investment options than workplace plans
Roth IRA
The ability to contribute begins to phase out at MAGIs of $146,000 for single taxpayers and $230,000 for married couples filing jointly
$7,000
An additional $1,000 in catch-up contributions for those age 50 or older
Withdrawals of contributions are always tax- and penalty-free
Withdrawals of earnings are tax- and penalty-free provided the five-year rule has been met and you have reached age 59½
Portable retirement plan not connected to an employer
May have more investment options than workplace plans
Spousal IRA
Nonworking spouses who file joint tax returns with their working spouses
$7,000
An additional $1,000 in catch-up contributions for those age 50 or older
Traditional: fully deductible contributions for those without access to a workplace retirement plan
Roth: tax- and penalty-free withdrawals of contributions anytime; tax- and penalty-free withdrawals of earnings provided the five-year rule has been met and you have reached age 59½
Allows nonworking spouses to have their own retirement plans
Rollover IRA
Anyone with funds in an existing retirement account
No limit on how much you can roll over
Allows retirement funds to be consolidated into a single account

Retirement plans for small-business owners and the self-employed 

One drawback of IRAs compared to employer-sponsored retirement plans is the low annual contribution limit. But if you are self-employed or a small-business owner, you have other options with higher limits. Becoming eligible for these plans may be easier than you think.

“If you have a side hustle and self-employment income, you absolutely have the ability to start your own retirement plan,” says Nathan Boxx, director of retirement plan services for financial advisory firm Fort Pitt Capital Group in Pittsburgh.

Whether you work for yourself or have a team of employees, the following accounts could be good options. 

SEP IRA

Any self-employed individual or employer can open a SEP IRA, and workers can contribute the lesser of 25% of their annual compensation or $69,000 per year. That puts a SEP IRA in line with a 401(k) plan in terms of contributions. But you can’t make catch-up contributions to a SEP account.

SIMPLE IRA

The SIMPLE IRA is what Boxx calls the “quick and dirty” option for small-business retirement plans. It is available to businesses with fewer than 100 workers and has few filing requirements.

“The trade-off is lack of flexibility,” Boxx says. You may not have the same plan or investment options that other accounts offer. SIMPLE IRAs also have lower contribution limits than 401(k)s.

In 2024, a worker can contribute up to $16,000 to a SIMPLE IRA. Savers age 50 or older can make $3,500 in catch-up contributions.

Payroll deduction IRA

Payroll deduction IRAs can be traditional or Roth and have the same contribution limits as those accounts. The main difference is they are funded through payroll deductions.

These accounts can be an attractive option for small-business owners who would like to help their workers save for retirement but don’t want the expense that comes with creating a 401(k) plan. 

Solo 401(k) 

Also known as one-participant 401(k)s, solo 401(k)s allow business owners with no employees or self-employed individuals to open an employer-sponsored plan for themselves and their spouses.

The reporting rules make these accounts more complex than some of the other options. On the other hand, they have significantly higher contribution limits.

As an employee, you can make elective deferrals of up to $23,000 in 2024. Savers age 50 or older can contribute an additional $7,500. In addition, as an employer, you can make a profit-sharing contribution of up to 25% of your compensation from the business. Combined, the maximum solo 401(k) contribution is $69,000 in 2024. 

Solo 401(k)s may be opened as traditional or Roth accounts.

Retirement plans for small-business owners and the self-employed 

PLANELIGIBILITY2024 CONTRIBUTION LIMITSBENEFITS
SEP IRA
Any employer
The lesser of 25% of annual compensation or $69,000 per year
Can be a traditional or Roth account
High contribution limits
Open to any business owner or self-employed individual
SIMPLE IRA
Employers with fewer than 100 employees
$16,000
An additional $3,500 in catch-up contributions for those age 50 or older
Can be a traditional or Roth account
Minimal paperwork requirements
Payroll deduction IRA
Any employer
$7,000
An additional $1,000 in catch-up contributions for those age 50 or older
Can be a traditional or Roth account
Convenient payroll contributions
No employer paperwork required
Solo 401(k)
Self-employed individuals and business owners with no employees
Employee contribution: $23,000
Catch-up contributions for those age 50 or older: $7,500
Total employer and employee contribution: $69,000 plus catch-up contributions
Can be a traditional or Roth account
High contribution limits
Can include a spouse who derives income from the business

Why is having a retirement plan important?

Most people understand the value of having money set aside for retirement, but it may not be obvious why you should use a retirement plan. After all, you could invest the money in a regular brokerage account, put it in certificates of deposit or leave it in your savings account.

A retirement plan makes more sense for several reasons:

  • Retirement plans offer tax incentives — either deductions for contributions or tax-free withdrawals in retirement.
  • Your employer may match a portion of your contributions. That’s essentially free money to boost your savings.
  • Retirement plans are subject to certain standards and protections by law.

“Retirement money is sheltered from creditors up to a certain threshold,” Boxx says. That is one example of the type of protection your money gets when deposited in a retirement plan.

How to start investing in your retirement

The earlier you begin saving, the more likely you are to be financially secure in retirement. It isn’t hard to open a retirement account either.

If you work somewhere that offers employer-sponsored retirement accounts, contact your human resources office to start making contributions. Most plans let you choose from several investment options, and many now have target-date funds, which make it simple to invest based on your expected retirement date.

IRAs and other plans can be opened online or in person at many banks and brokerage firms. For instance, Ubiquity Retirement + Savings offers solo 401(k) plans, while Chase, Charles Schwab and Fidelity all have IRAs.   

How to choose the best retirement plan for you

If you have an employer-sponsored plan with a match, start there. You want to contribute enough to that plan to get the full match. After that, you can consider other options.

Here are some questions to ask yourself:

  • Do I do any contract work that would make me eligible for a small-business retirement plan?
  • How much do I expect to be able to contribute each year?
  • Do I want a tax deduction now, or would I rather have tax-free money in retirement?

Before you jump into any account, be sure to read the fine print. “What fees are you paying?” Meadows asks. Those fees include the expense ratios for specific investments and the costs to administer the plan.

An accountant or financial advisor can help you weigh your options and select the best retirement plan for your needs. 

Frequently asked questions (FAQs)

That depends on your unique circumstances. While Fidelity Investments suggests you save 10 times your income by age 67, you may need more or less to retire comfortably.

When determining how much money you’ll need, consider the following:

  • Whether you will have debt payments in retirement.
  • The cost of living in your area.
  • Your expected lifestyle.
  • How you will fill your time.
  • Your expected lifespan.

Each account has its pros and cons. IRAs typically offer more investment options, but they may come with more fees. With a 401(k) account, you can contribute significantly more, and your plan administrator is a fiduciary, meaning they are required to work in your best interest. Talk to a trusted financial advisor to decide which is right for you. 

Yes. “The IRS always gets theirs at the end,” Chamberlin says.

The difference is when you pay those taxes. Roth accounts are taxed upfront since you fund them with after-tax dollars. With a traditional account, the money isn’t taxed until you make withdrawals in retirement. If you die with money in a traditional account, your heirs will pay the taxes on the remaining amount.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Maryalene LaPonsie has been writing professionally for nearly 25 years and specializes in personal finance, retirement, investing and education topics. In addition to 91Ӱ Blueprint, her work has been featured on Forbes Advisor, 91Ӱ News & World Report, Money Talks News, MSN and elsewhere on the web.

Hannah Alberstadt is the deputy editor of investing and retirement at 91Ӱ Blueprint. She was most recently a copy editor at The Hill and previously worked in the online legal and financial content spaces, including at Student Loan Hero and LendingTree. She holds bachelor's and master's degrees in English literature, as well as a J.D. Hannah devotes most of her free time to cat rescue.