Key Takeaways:
• Many people build their retirement income with a mix of employer-sponsored plans, IRAs, and in some cases, pensions.
• The retirement plan you select will depend on your employment status, income, and personal needs.
• Being mindful of withdrawal rules and tax obligations will help develop your ideal retirement income strategy.
Planning for the future is easier when you understand the types of retirement plans that are available to you. Each plan has its own set of rules regarding contributions, taxes, and withdrawals. Those rules will affect how much money you have to spend later on.
Employer plans offer convenience, and oftentimes, employers will match your contribution up to a certain amount. IRAs offer flexibility and give you more control over where and how you save your money. In this guide, you’ll discover the common types of retirement plans, how to manage or access your funds, and the value American Hartford Gold can offer.
1. Employer-Sponsored Plans
Employer-sponsored plans make up a significant portion of many retirement income strategies. For private-sector workers, a 401(k) is the most common, and 403(b) plans are used by many schools, hospitals, and nonprofit organizations. State and local government workers often use 457(b) plans, which share some features but also have their own specifications.
These types of retirement plans allow you to contribute a portion of each paycheck, typically through automatic payroll deductions you can set yourself, which makes it easier to stay on track with your financial goals. Many employers offer matching as well, up to a certain percentage, which can help you save more efficiently.
With a traditional 401(k), 403(b), or 457(b), you typically contribute pre-tax dollars, then pay taxes later when you withdraw during retirement. Many plans also offer a Roth option, which uses post-tax dollars and offers tax-free withdrawals if you meet certain conditions.
Contributions, Employer Matching, and Vesting
Retirement contributions come out of your paycheck before it hits your account, just like with employer-sponsored health coverage. If your employer matches 401(k) contributions, try to contribute the maximum amount they will match so you can reap the full benefit.
Some plans match dollar for dollar up to a cap, while others match a portion or percentage of your contribution. Vesting schedules determine when employer match contributions become fully yours. This could be immediate or spread across a few years. If you switch jobs, you have options for how to manage the money you have saved.
You can oftentimes leave your balance in the old plan if you wish, roll it over to your new employer’s plan, or move it to an IRA. A direct rollover can move your funds seamlessly without tax penalties.
2. Traditional and Roth IRAs
Individual retirement accounts, or IRAs, give you control of your money outside of the workplace. A traditional IRA may offer a tax deduction depending on your income and whether you or your spouse (if applicable) are covered by an employer plan. You pay taxes on these withdrawals in retirement.
A Roth IRA uses post-tax dollars and can be tax-free at the time of withdrawal if you meet the conditions. Income can affect whether contributions are deductible for traditional IRAs and whether you can contribute directly to a Roth IRA.
Many retirement savers build a mix of traditional and Roth dollars over time to create more flexibility later on for tax purposes. IRAs also carry their own set of rules for early withdrawals and required minimum distributions (RMDs), which typically begin at age 73 for traditional accounts.
Eligibility, Contributions, and Account Coordination
Eligibility depends on income and employer coverage. If an individual is married, and neither spouse is covered by an employer plan, traditional IRA contributions may be deductible at any income level. If one or both spouses have a retirement plan at work, the ability to deduct traditional IRA contributions goes down as their income increases.
Roth IRA contributions are also limited if your income is too high. There are ways to convert traditional IRA dollars to Roth dollars when that makes sense for your situation. IRAs work best when coordinated with employer plans.
If you already contribute heavily to a 401(k), an IRA could be a good way to diversify your asset mix. If you don’t have a workplace plan, an IRA can hold your retirement savings on its own. IRAs also make rollovers easier after job changes, so you can keep your retirement money in fewer places.
3. Self-Employed and Small-Business Plans
People who work for themselves have options too. A SEP IRA allows for higher employer contributions based on a percentage of compensation, which can help freelancers and business owners save more during high-income years.
A SIMPLE IRA allows employees and employers to contribute to traditional IRAs (for the employees). A Solo 401(k), sometimes referred to as an individual 401(k), allows a self-employed person to contribute as both the employer and employee. SEP IRAs are easy to set up and maintain, but only allow employer contributions.
SIMPLE IRAs require employer contributions each year, either through a match or a small fixed contribution for all eligible employees. Solo 401(k)s often allow Roth contributions and loan features not found in SEP or SIMPLE IRAs.
4. Pensions and Lifetime Income Options
Traditional pensions, also called defined benefit plans, still serve some workers. These are primarily offered to public-sector employees, but some private employers also offer them. A pension pays a monthly amount for life, typically determined based on years of service and final average pay.
Many pensions offer options at the time of retirement, like single-life options (for you) or joint-and-survivor options (to continue payments for a spouse). Some pensions include cost-of-living adjustments that increase the payment over time to account for inflation.
Some retirees also consider private annuities as a form of guaranteed income. Annuities are contracts with insurance companies that can convert a portion of your savings into scheduled payments.
How Do Payout Choices Affect Your Monthly Check?
A single-life option typically pays the highest monthly amount but stops upon the retiree’s death. A joint-and-survivor option pays a bit less each month but continues a portion or all of the benefit for the longer-living spouse.
Some plans allow a “period certain” feature that guarantees payments for a minimum number of years. If your pension does not include cost-of-living increases, plan to give yourself raises as needed from your retirement savings to keep up with changes in consumer pricing.
Withdrawals, Rollovers, and Timing Rules
Knowing the proper way to withdraw money from your plans is just as important as knowing how to deposit it. Many plans allow penalty-free withdrawals at specific ages or under certain conditions. In general, traditional 401(k)s, 403(b)s, and IRAs impose a 10% additional tax on early withdrawals before age 59½ unless an exception applies.
After that age, ordinary income tax typically applies to traditional withdrawals, while qualified Roth withdrawals can be tax-free when conditions are met. Remember, required minimum distributions (RMDs) typically begin at age 73 for many traditional accounts, and the funds must be taken by the deadline.
Rollovers are common when people switch jobs or retire. A direct rollover from one plan to another, or from a plan to an IRA, can keep your savings tax-deferred and help money move more seamlessly. Indirect rollovers, also known as 60-day rollovers, send you the money first, and then you must deposit it within the 60-day window to avoid penalties.
See How Gold Fits Into Your Plan With AHG
There are many different types of retirement plans, but the best option is the one that allows you and a spouse, if applicable, to live comfortably after you both stop working. Begin by identifying which accounts you can access through your employer or on your own, then set an automatic contribution that aligns with your budget.
If you are interested in exploring ways to include diverse assets in your retirement portfolio, a Gold IRA with American Hartford Gold could be worth considering to protect the value of your savings.
For those looking to add more value and variety to their portfolio, a known safe-haven asset like gold could be a great choice. Connect with our team today to learn more about how precious metals could fit into your long-term plan.
FAQs
What is the difference between a 401(k) and an IRA?
A 401(k) is an employer-sponsored plan that deducts an elected contribution from your paycheck. Some employers will match your contribution up to a certain amount. An IRA is opened by an individual and can be funded directly, not connected to any workplace, as long as you meet eligibility rules. Many people use both.
What happens to my retirement plan if I switch jobs?
You can typically keep your money in the old plan if you want to, roll it over to your new employer’s plan, or move it to an IRA. A direct rollover helps you avoid taxes and penalties down the line.
When do required minimum distributions (RMDs) begin?
Required minimum distributions (RMDs) normally begin at age 73 for many traditional accounts, and the mandatory amount must be taken annually. Missing an RMD can lead to penalties.
Sources:
403(b) vs. 401(k) vs. 457(b)—what’s the difference? | Manulife Retirement
Rollovers of retirement plan and IRA distributions | IRS
2025 and 2026 Roth IRA Contribution Limits | Charles Schwab
