Table of Contents
Key Takeaways
✔ The best retirement plans are built by combining different types of retirement accounts to balance growth, flexibility, and taxes.
✔ Employer-sponsored plans offer valuable 401k benefits, while IRAs provide broader investment control and tax planning options.
✔ A tax free retirement account, such as a Roth IRA, can add long-term flexibility by reducing taxes on future income.
✔ The best retirement investments depend on your age, goals, and time horizon—not a one-size-fits-all formula.
✔ Working with the right financial professional can bring clarity and confidence to retirement decisions and long-term planning.
Employer-Sponsored Plans
401(k) / 403(b) (for Nonprofits and Government Employees)
401(k) and 403(b) plans are among the most common types of retirement accounts offered by employers. While 401(k)s are typically offered by private companies, 403(b)s serve nonprofit and government workers. Both function similarly and offer meaningful long-term value.
In fact, the average 401(k) balance is now about $127,100, illustrating how consistent contributions and employer matching can compound over time.
Pros
- Tax-deferred contributions: Contributions are generally made pre-tax, lowering current taxable income.
- Employer match opportunities: One of the most valuable 401k benefits, matching contributions can significantly accelerate retirement savings.
- Higher contribution limits: Compared to IRAs, these plans allow larger annual contributions, supporting long-term accumulation.
- Automatic saving: Payroll deductions encourage consistent investing, which supports disciplined retirement planning.
Cons
- Limited investment choices: Participants must select from a predefined menu, which may limit diversification compared to broader IRA investment options.
- Early withdrawal penalties: Accessing funds before retirement age often triggers taxes and penalties.
- Required minimum distributions: Withdrawals are required later in life, which can impact tax planning strategies.
Best For
- Employees with access to an employer-sponsored plan, especially those offering matching contributions
- Individuals seeking structured, long-term retirement savings
- Those looking to capture core 401k benefits as part of a diversified mix of types of retirement accounts
SIMPLE IRA / SIMPLE 401(k)
SIMPLE plans are designed for small businesses and offer a streamlined approach to employer-sponsored retirement savings. These types of retirement plans balance ease of administration with meaningful benefits for both employers and employees.
Pros
- Mandatory employer contributions: Employers are required to contribute, helping employees build savings consistently.
- Lower administrative complexity: Easier and less costly to manage than traditional 401(k) plans.
- Tax-advantaged growth: Contributions grow tax-deferred, supporting long-term retirement accumulation.
Cons
- Lower contribution limits: Annual contribution caps are lower than standard 401(k) plans.
- Fewer customization options: Less flexibility in plan design and investment features.
- Limited access: Only available to businesses with fewer than 100 employees.
Best For
- Small business owners seeking a simple retirement solution
- Employees at smaller companies without access to a traditional 401(k)
- Individuals building savings across multiple types of retirement accounts to support long-term goals
Individual Retirement Accounts (IRAs)
Traditional IRA
A Traditional IRA allows individuals to contribute pre-tax dollars (subject to income and participation rules), with taxes paid when funds are withdrawn in retirement.
Pros
- Potential tax deduction: Contributions may be tax-deductible, helping reduce current taxable income.
- Broad IRA investment options: Access to a wide range of investments, including stocks, bonds, ETFs, and mutual funds.
- Tax-deferred growth: Investments grow without annual tax impact, supporting long-term compounding.
Cons
- Taxable withdrawals: Distributions in retirement are taxed as ordinary income.
- Required minimum distributions: Withdrawals must begin later in life, which can affect tax planning.
- Income limitations: Deductibility may be reduced if you also participate in employer-sponsored types of retirement plans.
Best For
- Individuals who expect to be in a lower tax bracket during retirement
- Savers seeking upfront tax benefits
- Those pairing a Traditional IRA with other types of retirement accounts for diversification
Roth IRA (Tax Free Retirement Account)
The Roth IRA is often viewed as a powerful tax free retirement account, offering tax-free growth and withdrawals when certain conditions are met.
Pros
- Tax-free qualified withdrawals: Contributions are made after tax, allowing earnings to be withdrawn tax-free in retirement.
- No required minimum distributions: Funds can remain invested longer, giving you greater control over when to take income.
- Tax diversification: Creates a source of tax-free income to balance taxable retirement accounts.
Cons
- No upfront tax deduction: Contributions don’t lower current taxable income, which may be less appealing for those seeking immediate tax savings.
- Income limits apply: Higher earners may be phased out or restricted from contributing directly.
- Lower contribution caps: Annual limits are lower than many employer-sponsored plans, which can slow long-term accumulation.
Best For
- Younger earners with long investment horizons
- Individuals seeking predictable, tax-free income in retirement
- Those building a diversified strategy using both tax-deferred and tax free retirement account options
Specialized & Self-Employed Options
SEP IRA / Solo 401(k)
SEP IRAs and Solo 401(k)s are popular types of retirement plans for self-employed individuals and small business owners. Both allow higher contribution limits than standard IRAs, making them powerful tools for long-term saving.
Pros
- High contribution limits: Allows self-employed individuals to save significantly more compared to traditional IRAs.
- Tax-deferred growth: Contributions generally reduce taxable income and grow tax-deferred.
- Flexible funding: Contributions can be adjusted year to year, which helps manage variable income.
- Solo 401(k) advantages: Delivers many familiar 401k benefits without the need for a traditional employer.
Cons
- Administrative responsibility: Account owners must handle setup, compliance, and reporting.
- Employer-only contributions (SEP IRA): SEP IRAs do not allow employee salary deferrals.
- Complexity: Rules can be more detailed compared to standard types of retirement accounts.
Best For
- Self-employed professionals, consultants, and freelancers
- Business owners without full-time employees
- Individuals seeking higher contribution limits as part of the best retirement investments strategy
Health Savings Account (HSA)
Although not a traditional retirement plan, HSAs are often used strategically alongside other types of retirement plans.
Pros
- Triple tax advantage: Contributions may be tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.
- Retirement flexibility: After age 65, funds can be used for non-medical expenses (taxed like an IRA).
- Long-term planning tool: Can function as a supplemental tax free retirement account for healthcare costs.
Cons
- Eligibility requirements: Must be enrolled in a high-deductible health plan.
- Non-medical withdrawal taxes: Withdrawals for non-medical use before age 65 may incur taxes and penalties.
- Contribution limits: Annual limits are lower than many employer-sponsored plans.
Best For
- Individuals with qualifying health plans
- Those planning for healthcare expenses in retirement
- Savers seeking additional tax-efficient tools to support the best retirement plans
Deciding Which Account Is Right for You
Key Factors to Consider
- Tax strategy: Decide whether tax savings today (tax-deferred accounts) or tax-free income later (a tax free retirement account) better supports your goals.
- Employment status: Employer-sponsored plans offer built-in 401k benefits, while self-employed individuals may benefit from SEP IRAs or Solo 401(k)s.
- Investment flexibility: Some investors value broader IRA investment options, while others prefer the simplicity of workplace plans.
- Time horizon: Younger savers often prioritize growth, while those closer to retirement may focus on stability and income planning.
Why Professional Guidance Matters
Coordinating the best retirement investments across different accounts requires more than guesswork. A qualified financial professional can help align contributions, investments, and tax considerations—ensuring each account works together instead of in isolation.
Best Financial Advisors simplifies this process by connecting you with experienced professionals who understand how to build retirement strategies around your specific needs and life stage.
What Is the Golden Rule for Retirement?
The most widely accepted rule in retirement planning is simple: save consistently, diversify wisely, and plan for the long term. The strongest retirement outcomes usually come from disciplined saving across multiple types of retirement accounts, rather than trying to time markets or chase short-term returns.
Key principles to follow:
- Start saving as early as possible to maximize compounding
- Spread savings across different types of retirement plans to manage risk and taxes
- Focus on sustainable growth using best retirement investments aligned with your time horizon
What Is the Best Age to Retire?
There is no single “best” retirement age. The right time depends on financial readiness, health, lifestyle goals, and income needs—not just a number.
Factors that influence retirement timing include:
- Savings and investment growth across your best retirement plans
- Healthcare coverage and anticipated costs
- Whether you plan to work part-time or fully stop working
How Much Super Should I Have at 60?
While “super” is commonly used outside the U.S., the idea translates to retirement savings benchmarks. In American terms, this question asks how much you should have saved across your types of retirement accounts by age 60.
Common guidelines suggest:
- About 6–8 times your annual income saved by age 60
- A mix of tax-deferred and tax free retirement account savings
- Investments positioned to balance growth and stability
How Much Money Should You Have to Retire at 60 Years Old?
There’s no universal number, but retirement income planning often centers on replacing a percentage of pre-retirement income.
Key considerations include:
- Expected annual spending in retirement
- Healthcare and long-term care costs
- Inflation and longevity risk
Frequently Asked Questions (FAQs)
What are the best retirement plans if I want both flexibility and tax advantages?
The best retirement plans often combine employer-sponsored options with IRAs, allowing you to balance tax-deferred growth, tax-free income, and flexible IRA investment options based on your goals.
Can you have multiple types of retirement accounts at the same time?
Yes. Many investors use several types of retirement accounts together to diversify tax exposure, investment strategies, and withdrawal flexibility in retirement.
What is the advantage of having a tax free retirement account?
A tax free retirement account, such as a Roth IRA, allows qualified withdrawals without taxes, which can help manage income and reduce tax impact later in retirement.
Are employer plans or IRAs better for long-term investing?
Both serve different purposes. Employer plans offer valuable 401k benefits, while IRAs provide broader investment choice—making a combination of both effective for long-term planning.
How do I choose the best retirement investments for my situation?
The best retirement investments depend on your time horizon, risk tolerance, and account type. Working with a financial professional can help align investments across different types of retirement plans.
Take the Next Step Toward the Right Retirement Plan
Understanding the best retirement plans is an important first step—but real progress happens when that knowledge is paired with the right professional guidance.
Best Financial Advisors is not a financial advisory firm. We are a trusted referral and matching service that connects individuals and businesses with qualified financial professionals for retirement planning, wealth management, tax strategies, insurance solutions, and business financial services.
Discover how Best Financial Advisors can connect you with a trusted financial professional in Davie, FL.
