The main motive of creating a retirement savings account is to make a safe post-job life so that you cash in for what you worked all your life. There’s a lot of confusion about choosing the best retirement savings account as the market has a lot of things to offer.
The initial three individual retirement accounts that existed in the United States are traditional IRA, Roth IRA, and SIMPLE IRA. This has successfully been replaced by the retirement savings account. Now you can easily choose out of different options like
- Individual retirement plans – Traditional IRAs, Roth IRAs, Spousal IRAs, my IRAs, and rollover IRAs.
- Retirement plans for self-employed and small business owners – SIMPLE IRAs, SEP IRAs, Solo 401(k)s, Solo Roth 401(k)s, profit sharing, and payroll deduction IRAs.
- Employer sponsored retirement plans – 401(k)s, Roth 401(k)s, 403(b)s (or TSAs), and 457(b)s.
IRA basically gives you the authority to take control of choosing your bank, plan the brokerage, and hire someone to make the investment decisions for you or you can do it by yourself. IRAs provide a wide bandwidth to choose from to make it the best retirement savings account for you.
A traditional 401(k) or a 403(b) account is basically the pre-tax money that is already deducted before you take your check back home. So, in that way, it supercharges your savings on the front end. Meanwhile, Roth uses income after taxes rather than pre-tax, so while withdrawing the sum you pay your taxes accordingly. But the silver lining is you can decide what to do with your retirement savings account even after you leave the employer.
For self-employed and small business owners, the contribution limit is higher than the most employers and the IRAs. Such plans offer more options to the investors than 401(k).
If you’re not a financial professional, it is recommended to contact a professional for information about the best retirement savings account, which will be fitting your requirements. You need to give a consideration to the market risk, interest rate risk, as well as the inflation risk.