Saving for retirement is a journey, and every path is different. You may be saving in a traditional employer-sponsored retirement plan, like a 401(k), but depending on your interests, needs and retirement dreams, you may want to expand beyond that one method of saving. In fact, Thrivent's 2022 Retirement Readiness Survey1 found that among those nearing retirement, 42% intend to rely on a mix of assets such as a 401(k), personal savings, Social Security benefits and individual retirement accounts (IRAs).
The different types of retirement accounts may feel like an alphabet soup of names, benefits and eligibility. If you're at the point in life where you are starting to envision what retirement may look like for you, learning about the savings options available can help you decide if you need to diversify your savings options.
Among those nearing retirement, 42% intend to rely on a mix of assets such as a 401(k), personal savings, Social Security benefits and individual retirement accounts (IRAs).
Types of employer-sponsored retirement plans
401(k) & Roth 401(k)
- 2023 contribution limit: $22,500
- 2023 catch-up limit: $7,500
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A 401(k) is a tax-later account, meaning your contributions reduce your taxable income during your contribution or working years. And any investment earnings aren't taxed. Instead, you pay taxes once you withdraw funds. You can begin withdrawing from your 401(k) penalty-free at 59½, and at a specific age determined by your birthdate, you must take the
Your employer also may offer a
403(b) & Roth 403(b)
- 2023 contribution limit: $22,500
- 2023 catch-up limit: $7,500
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Like a 401(k), you can contribute to your retirement investments through payroll deductions. With a traditional 403(b), your money goes in pretax, and your investment earnings can grow tax-deferred until it's time to withdraw the funds. Typically, 403(b) plans are limited to
You may have the option for a Roth 403(b). In this plan, you make contributions using after-tax dollars, but you don't pay taxes on withdrawals as long as you have a qualified distribution.2 If you believe you may be in a higher tax bracket in your retirement, this may be an option to discuss with your financial advisor and tax professionals.
457(b) & Roth 457(b)
- 2023 contribution limit: $22,500
- 2023 catch-up limit: $7,500
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Some employers offer a Roth 457(b), which works similarly to Roth 403(b) plans where you contribute post-tax dollars. However, when it comes time to withdraw funds, you don't have to pay taxes on it as long as you have a qualified distribution. It may make sense if you're considering your potential income at retirement being in a higher tax bracket and are offered this plan.
SEP IRA
- 2023 contribution limit: The lesser of $66,000 or 25% of your salary
With the
As with a 401(k), you don't pay taxes until withdrawals begin. You can begin withdrawing penalty-free at 59½ and must take RMDs at a specific age.
The
SIMPLE IRA
- 2023 contribution limit: $15,500
- 2023 catch-up limit: $3,500
The Secure Act 2.0 will now allow Roth SIMPLE IRAs, which work like other Roth accounts - you pay taxes upfront and so you won't have to pay taxes when you withdraw funds. Check with your employer to see if they will offer one in the near future.
Company-provided pension or profit-sharing plans
Though not as common today, some employers offer profit-sharing plans or company-provided pensions. Both of these are potential ways to get an income during retirement.
With a profit-sharing plan, the employer gives employees a share in company profits based on earnings (usually quarterly or annually). The company lays out what percentage of profits employees get and makes contributions to the plan. The IRS defines
A pension is another possible way to generate retirement income. With a pension, employers contribute to investments that grow while the employee works. Once the employee retires, they get funds from their pension plan in one of two ways:
- Defined benefit pension. The employee receives a set monthly payment for life (employees also may choose a lump-sum payment).
- Defined contribution pension. The employer contributes to an investment account during the employee's working years, and upon retirement, the balance transfers to the employee.
Consider a Solo 401(k) if you are self-employed with no employees
- 2023 contribution limit: $66,000
- 2023 catch-up limit: $7,500
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However, a solo 401(k) is for business owners (with no employees) and their spouses. It allows you to contribute as both an employee and an employer, so if you want to max out your retirement savings over and beyond the IRS limits for other plans, it may be an option.
Individual retirement accounts (IRAs) offer a way to invest outside of your employer's plan
Traditional IRAs
- 2023 contribution limit: $6,500
- 2023 catch-up limit: $1,000
An
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A traditional IRA may be right for you if you:
- Have earned income.
- Believe you may be in the same or a lower tax bracket when you retire.
- Want an immediate tax deduction.3
- Are willing to wait until retirement to access funds (additional taxes and penalties will apply unless you meet IRA exception criteria).
Roth IRAs
- 2023 contribution limit: $6,500
- 2023 catch-up limit: $1,000
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Unlike traditional IRAs, Roth IRAs have income limits to participate. You may contribute to a Roth IRA if your monthly adjusted gross income (MAGI) for 2023 is less than $153,000 (single filer) or less than $228,000 (joint filer).
A Roth IRA may be right for you if you:
- Have earned income within the income limits.
- Believe you'll be in a higher tax bracket in retirement.
- Want tax-free distributions in the future.
- Want the option to take out the money you've contributed before age 59½ without penalties.4
Catch-up contributions help people 50 and older boost their retirement savings
2023 catch-up contribution limits
Plan type | Annual contribution limit | Catch-up contribution limit | Total individual contribution limit (if age 50 or older) |
Large employer-sponsored retirement plans: 401(k), 403(b), 457(b) | $22,500 | $7,500 | $30,000 |
Small business employer-sponsored plans or self-employed retirement plans: SIMPLE 401(k), SIMPLE IRA | $15,500 | $3,500 | $19,000 |
Traditional IRA, Roth IRA, SEP IRA | $6,500 | $1,000 | $7,500 |
Secure Act 2.0 & catch-up contributions
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The legislation also mandates that beginning in 2024, all catch-up amounts for people who earn over $145,000 in the previous year must be deposited into a Roth account. The earning amount will be adjusted for inflation starting in 2025.
Getting the help you need to make the right choices
It's common to have doubts, fears and questions about available retirement plans. You may even wonder if you're doing enough to save for your ideal retirement. Getting personalized help along the way can make a big difference. Start by checking your progress by using a
Working with a