Everyone wants to live a hassle-free life in their old age, without any financial constraints. It would, therefore, be advisable for one to save up their funds in one of the best retirement savings account.
Here are some of the best retirement savings account:
401(k) or 403(b) offered by your employer: For most people, this is a convenient way to start investing for retirement. The money is withheld through payroll deduction, and you can save up to $18,000. If you leave your job, you can roll the account over into a new employer’s 401(k) or your own IRA.
Solo 401(k): A sole proprietor can set up an individual 401(k) and make contributions as both the employee and employer.
SEP IRA: SEP stands for simplified employee pension, and this kind of account is used principally by the self-employed or small business owners. As the employer, you can contribute up to 25 percent of your income. These accounts are easier to set up than a solo 401(k).
Simple IRA: This plan permits small employers (fewer than 100 employees) to set up IRAs and there is minimal paperwork requirement. Employers must either match employee contributions or make unmatched contributions. An employee can contribute up to $12,500.
IRA: Anyone can contribute up to $5,500 a year to an IRA. The funds are exempt from taxes. You can contribute to both an IRA and a 401(k), but if you’re covered by a retirement plan at work, you can’t deduct your IRA contributions from your taxable income if you earn more than $71,000 per annum (for single filers) or $118,000 (married, filing jointly). After earning $61,000 and $98,000, respectively, you get only a partial deduction.
Roth IRA: With a Roth IRA, you are paying after-tax dollars, and you get no tax deduction for your contribution. The money you create grows tax-free and you pay no tax on withdrawals after you reach 59 1/2. There is no obligatory withdrawal at the age of 70, but you can take out the amount you contributed (except your earnings) at any time without penalty or taxes due, which is not the case with traditional IRAs. To fund to a Roth IRA, you must make less than $131,000 (if you’re single) or $193,000 (if you’re married, filing jointly).
Health savings account (HSA): If you have certain high-deductible health insurance plans you can save money tax-free in an HSA. You can contribute up to $3,350 a year for an individual or $6,650 for a family. You can withdraw money from your account to pay allowable medical expenses. Once you’re 65, you can extract money for any reason without penalty, however, taxes are applicable except the funds are used for qualified medical expenses.