Employer-sponsored retirement plans provide **tax advantages, employer contributions, and automatic savings**, helping employees build long-term financial security. Common options include **401(k) and 403(b) plans**, which allow **pre-tax or Roth contributions**, often with employer matching, while **pension plans** offer fixed retirement benefits. **Simple and SEP IRAs**, designed for small businesses, provide tax-deferred growth. These plans offer **key benefits** like tax advantages, employer matching (free money for retirement), automatic payroll deductions for consistent savings, and tax-free **compound growth**. To maximize your plan, contribute enough to receive the **full employer match** and choose investments wisely.
401K
A 401(k) plan is a tax-advantaged retirement savings option where employees contribute pre-tax (Traditional) or post-tax (Roth) income. Investments, including mutual and index funds, grow tax-free until withdrawal. Key features: Tax Benefits – Traditional 401(k)s reduce taxable income; Roth 401(k)s offer tax-free withdrawals. Employer Matching – Many employers contribute a percentage of employee savings. Limits – In 2024, contributions max at $23,000 (+$7,500 for 50+). Vesting – Employer contributions may require a waiting period for full ownership. Withdrawals – RMDs start at 73 for Traditional 401(k)s; Roth 401(k)s have none. Maximizing contributions, employer matching, and smart investments makes a 401(k) a powerful retirement tool.
HSAs
A Health Savings Account (HSA) is a tax-advantaged savings option for individuals with a high-deductible health plan (HDHP) to cover medical expenses. It offers a triple tax benefit: contributions are tax-deductible, investments grow tax-free, and withdrawals for qualified medical expenses remain tax-free. In 2024, contribution limits are $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up for those 55 and older. Unlike FSAs, HSA funds roll over indefinitely and aren't tied to an employer. Many HSAs offer investment options, allowing for long-term growth. After age 65, funds can be withdrawn for any purpose, though non-medical withdrawals are taxed as ordinary income. For HDHP holders, an HSA is a powerful tool for managing healthcare costs while building tax-free savings.
Use our Roth 401(k) vs. Traditional 401(k) calculator to explore the essential differences in tax implications, contribution limits, and withdrawal choices. This tool will help you make educated decisions about your retirement savings approach.
Traditional or Roth?
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Find answers to common questions about 401(K) plans.
