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Most Popular Retirement Plan Options Explained


Retirement planning is an integral part of life, and a solid plan can help you build your nest egg so that you’re prepared for the future. Several types of retirement plans are available, each with its own benefits and considerations. In this week's article, we’ll explore some of the different options, so you can better understand what may suit your needs and desired future lifestyle.

Roth IRA

A Roth IRA is a retirement savings account funded by after-tax contributions. This retirement account allows you to benefit from tax-free withdrawals during retirement, as earnings and contributions are exempt from taxes. Roth IRAs have no RMDs, meaning you do not have to take minimum distributions from the account. The limits and the tax benefits for IRAs are set by the Internal Revenue Service (IRS). The contribution limits for traditional IRAs and Roth IRAs are the same. For 2023, you can contribute up to $6,500 in 2023, plus an additional $1,000 for those 50 or older.


This is an excellent option for those who anticipate their future income tax bracket to be higher than it is currently. There are contribution limits and income restriction guidelines, so check the rules of your particular plan.


Traditional IRA

A Traditional IRA is a retirement savings account funded by pre-tax contributions. This type of plan offers tax benefits today, as your contributions are tax-deductible. While you can receive tax breaks now, you will have to pay taxes on the contributions and earnings when you withdraw during retirement. As mentioned above 2023, you can contribute up to $6,500 in 2023, plus an additional $1,000 for those 50 or older.

This is an excellent option for those who currently anticipate their future income tax bracket to be lower than it now is. Furthermore, like Roth IRAs, there are contribution limits and guidelines for traditional IRAs, so be sure to check the rules of your particular plan.


401(k) Plan

Another popular retirement plan is the 401(k) plan. Employers offer this type of retirement savings vehicle to their employees as a way to save for retirement with pre-tax dollars. An employer typically manages these plans, and there may be limits on the types of investments allowed in the account. Employees can choose to contribute a percentage of their salary to the plan, and employers may match all or a portion of those contributions. The funds are invested in stocks, bonds, mutual funds, and other assets, with the aim of growing the investment over time. For 2023, you can contribute $22,500 to your 401k account and an additional $7500 if you are over 50 years old. At retirement age, employees can withdraw from these accounts to help fund their retirement.


SEP IRA Plans

A simplified employee pension or SEP IRA is another popular type of retirement vehicle. Self-employed individuals generally use this type of plan. It may also be used by businesses with at most 25 employees. This plan allows employers to make contributions on behalf of their employees or self-employed individuals on behalf of themselves and offers the same tax benefits as other IRA plans. An employer can contribute up to 25% of each employee’s income to a maximum of $66,000 in 2023. If you’re self-employed, you can contribute up to 25% of net income up to the same limit.


Solo 401 (k) Plan

A Solo 401(k) plan is a type of retirement plan designed for self-employed individuals or small business owners. This type of plan works similarly to a traditional 401(k) plan but with streamlined filing requirements compared to a 401k plan covering multiple employees. As a self-employed individual, in 2023, you can contribute up to 100% of compensation up to the annual contribution limit of $22,500 in 2023 or $30,000 if you are 50 or over. Then, as an employer and owner of the business, you can contribute up to 25% of your business’ income. This makes for an attractive dual contribution formula.


Start Planning Your Future Today

These are just a few retirement plans to help you save for your golden years. To learn about other options and determine which is suited for your situation, it's best to speak with a qualified professional.


At Fourth Avenue Financial, our first priority is your overall financial success, no matter what life events come your way. We want to help you develop, implement, and monitor a strategy designed to address your situation to ensure all your investments set you up for a path of financial success. If you are ready to start planning for your financial future, we are here to help. Contact us today at (304) 746 7977 to schedule a meeting with one of our experienced financial advisors or schedule online: https://calendly.com/fourthavenuefinancial/introductory-zoom.


Securities are offered through J.W. Cole Financial, Inc. (JWC), Member FINRA / SIPC. Advisory Services are offered through J.W. Cole Advisors, Inc. (JWCA). Fourth Avenue Financial and JWC/ JWCA are unaffiliated entities.


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