Whether you’re a public school teacher, a small-business owner or one of thousands of employees at a Fortune 500 company, there’s a retirement plan for you. Still, the shift from traditional pensions to individual savings plans has created challenges for workers and left many families unprepared for retirement at a time when an increasing number of Americans are headed into their non-working years.
Part of the problem is that many workers aren’t taking advantage of the range of plans that exist, putting a secure retirement further out of reach. Almost 40 million working-age households, or 45 percent, don’t have any kind of retirement account, whether an employer-sponsored one or an individual retirement account (IRA). Just over half of private-sector workers have access to a plan through work, and of those that do, only half participate in it.
For those without an employer-sponsored plan, there are still ways to save for retirement. Here are 10 plans that can help you sock away for your golden years. Not all will be available to every person, but at least one will.
Related: The Retirement Revolution That Failed: Why the 401(k) Isn’t Working
Plans for everyone
Traditional IRA: This type of account allows anyone with taxable compensation to make tax-deductible contributions up to $5,500 this year. For those 50 and over, that limit is raised to $6,500. Contributions can’t be made after you reach 70.5 years old. You can contribute to a traditional IRA even if you participate in another plan through your employer or business. The typical investment options are funds, depending on where the account is held.
Roth IRA: Like a traditional IRA, a Roth is available to most people with taxable compensation. You can also contribute to one even if you have a workplace retirement plan. But the contributions — of up to $5,500 this year ($6,500 for those 50 and over), depending on your income — can’t be deducted on your taxes. Contribution limits get lower for single tax filers making $117,00 or more or married couples making $184,000 and up, and as of 2016, singles making at least $132,000 and couples earning $193,000 or more are ineligible to contribute to Roth IRAs. Roth contributions can be withdrawn tax-free and earnings can also be taken out tax-free after the age of 59.5 (as long as you’ve met the five-year holding requirement). Contributions can be made even after 70.5 years. The typical investment options are funds, depending on where the account is held.
myRA: Launched last year by the federal government, this plan is considered a starter retirement plan and works very much like a Roth IRA. Individuals can contribute how much they want and their investment is backed by the U.S. Treasury. After the account hits $15,000 (or after 30 years), the myRA balance is transferred into a private Roth IRA. The biggest drawback is the low return rate, which is the same rate as the Government Securities Fund for federal employees, which has returned 3.19 percent each year over the past 10 years.
Related: The Good and Bad of Obama’s New myRA Retirement Savings Plan
Workplace Plans
401(k): This plan is provided by private employers, who may match your pre-tax contributions. The maximum annual contribution for 2016 is $18,000, while the total contributions from both you and your employer are capped at $53,000. If you are 50 or over, you can contribute an extra $6,000 a year to catch up on retirement savings. The typical investment options are mutual funds.
403(b): This plan is provided by non-profits as well as public schools and universities, which may match employee contributions. Like the 401(k), the maximum annual contribution this year is $18,000, and the total max contributions from workers and employers are $53,000. Enrollees who are 50 and over can contribute an extra $6,000 a year, and some plans also offer employees with 15 years of service the ability to make additional catch-up contributions. These plans invest in funds and annuities.
457(b): These plans are available for employees of state and local governments and certain non-profits. These plans have the same employee maximum contribution limit as the previous two: $18,000 this year. While employers can offer matches for 457(b) plans, they rarely do. Plans from state and local governments can offer the 50-year catch-up contribution provisions, but non-profit ones can’t. But these plans can also offer a special catch-up contribution for those employees within three years of retirement age (as set by the plan). This type of plan invests in mutual funds.
Thrift Savings Plan: This retirement account is for federal government workers and members of the military. TSPs have the same annual maximum contribution limits as 401(k)s. They also allow an extra catch-up contribution of up to $6,000 a year for those 50 and over. These plans offer a selection of individual and lifecycle funds for investing.
Plans for self-employed or business owners
SEP IRA: The most common plan among freelancers and small business owners allows contributions up to about 20 percent of compensation, or $53,000 a year. Figuring out your contribution based on compensation is complex, but there are calculators to help. SEP IRAs don’t allow for catch-up contributions, but savers can keep contributing to the plans after they reach 70.5 years of age. The typical investment options are funds, depending on where the account is held.
Related: Self-employed? Here’s How to Save for Retirement
Simple IRA: This plan — which is an employer-provided traditional IRA — gives small business owners an easy way to contribute to their workers’ and their own retirement savings. The maximum annual contribution by employees for this year is $12,500, though workers over 50 can also make a catch-up contribution of up to $3,000 in 2016. Employers are required to match the worker’s contribution up to 3 percent of their compensation, or contribute 2 percent of the employee’s compensation up to $265,000.
Solo 401(k): This type of account works for sole proprietors and their spouses. The plans allow you to sock away $18,000 as an employee and an additional 20 percent of your compensation or $53,000 (whichever is less) as your own boss. Again, like a SEP IRA, you need to calculate the exact percentage you can put away as the boss. Spouses who work together can both put in $53,000. There’s also the option of making a catch-up contribution of $6,000 for those 50 and over. The typical investment options are funds, depending on where the account is held.
