Choosing the Best Retirement Accounts

If retirement is on your mind, you need to start investing. Retirement planning is an important task. You need to start planning early and invest in the right options. The stakes are simply too high when it comes to retirement. If you do not plan well, you risk losing your peace of mind over money issues later in life.

For most people, there are limited options to generate income after retirement. You cannot continue working forever, as age and deteriorating health may eventually make it difficult. This is why it is important to start saving and investing today.

Below are some of the best retirement plans for individuals planning for their golden years:

1. 401(k)

A 401(k) is a defined contribution retirement plan offered by an employer to its employees. Your employer needs to offer you a 401(k) plan. If your employer does not offer one, you cannot open a 401(k) on your own. You can contribute a portion of your salary to your 401(k) plan, and your employer may also match some or all of your contributions, depending on the company’s policy.

There are two main types of 401(k) plans – Traditional 401(k) and Roth 401(k).

A Traditional 401(k) accepts contributions on a pre-tax basis, while a Roth 401(k) accepts contributions after taxes have been deducted from your income. This difference also affects how your withdrawals are taxed in retirement. With a Traditional 401(k), your withdrawals are taxable in retirement. With a Roth 401(k), qualified withdrawals in retirement are tax-free.  

A 401(k) also has annual contribution limits. For 2026, the employee contribution limit for people under 50 is $24,500. Employees aged 50 and above can make an additional catch-up contribution of $8,000. A higher catch-up contribution limit of $11,250 applies to employees aged 60, 61, 62, and 63. You can contribute up to these limits year after year and save up for your retirement in a systematic and steady manner. And, if your employer matches your contributions, you can reach your goal even sooner.

2. 457(b)

If you are looking for retirement plans for individuals in the state or local government or an eligible tax-exempt organization, a 457(b) plan can help you save and build wealth for retirement. A 457(b) plan is a retirement plan that is somewhat similar to a 401(k), but it is not exactly the same. It is designed specifically for employees of state and local governments and certain tax-exempt organizations under IRC Section 501(c).

Similar to a 401(k), employees can contribute a portion of their salary to a 457(b) plan up to the annual contribution limits. For 2026, the employee contribution limit is $24,500. If you are 50 and above, you can make an additional catch-up contribution of $8,000. Plus, under the Setting Every Community Up for Retirement Enhancement Act (SECURE) Act 2.0, there is a higher catch-up contribution limit of $11,250 for employees aged 60, 61, 62, and 63. Contributions to a 457(b) plan are made on a tax-deferred basis, and any earnings on the investments also grow tax-deferred. Hence, withdrawals in retirement are taxed as ordinary income.

3. 403(b)/ Tax-sheltered annuity

The 403(b) plan, commonly referred to as a TSA, is a retirement plan offered by public schools, state colleges, universities, certain 501(c)(3) tax-exempt organizations, charities, and eligible religious organizations. It can also be used by ministers and certain church employees.

Employees can contribute a portion of their salary to an individual 403(b) account. Similar to a 401(k), employers may also contribute to employees’ accounts. Many 403(b) plans have relatively short vesting periods for employer contributions and may offer a more limited selection of investment options compared to other accounts.

Most 403(b) plans are traditional accounts, where salary contributions are made on a tax-deferred basis. The contributions are not subject to federal or state income tax until they are withdrawn in retirement. However, some employers also offer Roth 403(b) accounts. Contributions to a Roth 403(b) are made using after-tax income, but qualified withdrawals, including investment earnings, are generally tax-free in retirement.

4. Individual Retirement Account (IRA)

An IRA is a self-funded retirement account. It is one of the best retirement plans for people who do not have a company-sponsored account. Unlike a 401(k), you do not need to work for an employer that offers a retirement plan to open one. Anyone with eligible earned income can open and contribute to an IRA. It works like a 401(k) and comes in two types – Traditional IRA and Roth IRA.

The tax treatment is also similar. Contributions to a Traditional IRA may be tax-deductible. However, the deduction may be limited if you or your spouse is covered by a workplace retirement plan and your income exceeds some specified limits. Contributions to a Roth IRA are made using after-tax income, but qualified withdrawals in retirement are tax-free.

IRAs also have annual contribution limits set by the Internal Revenue Service (IRS). For 2026, the maximum contribution you can make to all of your Traditional and Roth IRAs combined is $7,500 if you are under age 50 and $8,600 if you are age 50 or older. However, your total contribution cannot exceed your taxable compensation for the year. Roth IRAs are also subject to income limits.

• Single/ head of household: If you are single, the head of your household, or married filing separately without having lived with your spouse during the year, you can make the full contribution if your Modified Adjusted Gross Income (MAGI) is less than $153,000. If your MAGI is between $153,000 and $168,000, your contribution limit is reduced. If your MAGI is $168,000 or more, you cannot contribute to a Roth IRA.
• Married filing jointly/ qualifying surviving spouse: If you are married filing jointly or a qualifying surviving spouse, you can make the full contribution if your MAGI is less than $242,000. If your MAGI is between $242,000 and $252,000, your contribution limit is reduced. If your MAGI is $252,000 or more, you are not eligible to contribute to a Roth IRA.
• Married filing separately: If you are married filing separately but are living with your spouse or have lived with them at any time during the year, your contribution limit is reduced if your MAGI is less than $10,000. If your MAGI is $10,000 or more, you cannot contribute to a Roth IRA.

5. Savings Incentive Match Plan for Employees (SIMPLE) IRA

A SIMPLE IRA is one of the best retirement accounts for small companies. This is a retirement savings plan that can be used by businesses with 100 or fewer employees. Both employees and employers can contribute to the account, but employer contributions are mandatory. Employers must choose one of the following contribution methods each year:

• A 2% non-elective contribution for every eligible employee, regardless of whether the employee contributes to the plan. The contribution is calculated on compensation up to the annual limit of $360,000 for 2026.
• A matching contribution of up to 3% of an employee’s compensation. Under the SECURE 2.0 Act, employers with 26 to 100 employees may choose to make a 4% matching contribution if they adopt the higher 2026 employee contribution limit of $18,100 that applies to employers with 25 or fewer employees.
• The SECURE 2.0 Act also introduced a provision for employers using the non-elective contribution method. Employers with 26 to 100 employees may make a 3% non-elective contribution if they adopt the higher employee contribution limit available to smaller employers. In addition, employers may choose to make an extra uniform non-elective contribution of up to the lesser of 10% of an employee’s compensation or $5,000.

6. Simplified Employee Pension (SEP) IRA

A SEP IRA is a retirement plan that can be used by companies of all sizes and strengths, including self-employed individuals. Unlike a SIMPLE IRA, there is no limit on the number of employees a business can have to offer a SEP IRA. Also, unlike all other retirement accounts, SEP IRAs only allow the employer to contribute to the account. Employees cannot make salary deferral contributions. The only way you can contribute to your own SEP IRA is if you are self-employed. In such cases, you are considered both the employer and the employee, so you make contributions to your own SEP IRA. SEP IRAs also provide a wider range of investment choices than many retirement plans.

Employer contributions are made to a traditional SEP IRA, and employees are always 100% vested in these contributions. SEP IRAs also have annual contribution limits, but they are comparatively more generous than other IRAs. For 2026, an employer can contribute up to the lesser of 25% of an employee’s compensation or $72,000.

7. Thrift Savings Plan (TSP)

The TSP is a retirement savings and investment plan for federal government employees and members of the U.S. uniformed services. It functions similarly to a 401(k). For 2026, you can contribute up to $24,500 to your TSP. If you are age 50 or older, you can make an additional catch-up contribution of $8,000. People aged 60 to 63 also qualify for a higher catch-up contribution limit of $11,250 under the SECURE Act 2.0.

A Traditional TSP is funded with pre-tax dollars. Your investments then grow on a tax-deferred basis, and you pay income tax only when you withdraw the money in retirement. The TSP also offers a Roth option. Contributions to a Roth TSP are made with after-tax dollars, and qualified withdrawals in retirement, including investment earnings, are tax-free.

If you are working in the uniformed services and started serving on or after January 1, 2018, you are automatically enrolled in the TSP under the Blended Retirement System after completing 60 days of service. Unless you choose otherwise, 3% of your basic pay is automatically deducted from each paycheck and contributed to your Traditional TSP account. TSPs also allow you to transfer your retirement savings from previous employer-sponsored plans, such as a 401(k) or IRAs.

8. Health Savings Account (HSA)

While there are many retirement savings options available depending on your employment, income, and other factors, the HSA stands out because it is the only account dedicated specifically to healthcare savings. As the name suggests, an HSA is designed to help you save for qualified medical expenses. If you are enrolled in a High-Deductible Health Plan (HDHP), you may be eligible to contribute to an HSA. It is a tax-advantaged account that offers a triple tax benefit. Contributions are generally tax-deductible, the earnings grow tax-free, and withdrawals are also tax-free when used for qualified medical expenses.

HSAs have annual contribution limits. For 2026, the maximum contribution is:

• $4,400 for individuals
• $8,750 for families
• If you are 55 or older, you can make an additional catch-up contribution each year of $1,000.

9. Annuity plans

Annuities may be one of the best retirement plans for individuals looking for a guaranteed income stream during retirement. These plans are offered by insurance companies and allow you to pay a sum to the insurer in return for regular income payments.

An annuity has two phases. The first is the accumulation phase, during which you put your money into the annuity. This can be either through a lump-sum investment or regular contributions over time. The second is the annuitization phase. This is when you receive regular payments for a fixed period.

There are several types of annuities available, including deferred annuities, immediate annuities, fixed annuities, variable annuities, single-life annuities, indexed annuities, and tax-sheltered annuities. Each type offers different features and is suitable for different retirement needs. Speaking to a financial advisor can help you choose the annuity plan that best aligns with your retirement goals.

Start now and choose the best retirement plans for your needs

The key to retirement planning is to start early and build your savings over time. Starting later in life can put more pressure on you, and you may have to save much more to make up for the lost time. While catch-up contributions can help wherever they are available, they cannot be seen as a substitute for starting early.

Speak to a financial advisor to understand which of these retirement accounts make the most sense for your needs. You may also benefit from investing in a combination of different retirement plans based on your goals. Our financial advisor directory can help you find a financial advisor near you who can guide you in choosing the best retirement accounts.

Frequently Asked Questions (FAQs) about retirement plans for individuals

1. What is the best retirement plan?

The best retirement plan depends on your needs. Look for an account that allows you to contribute comfortably and consistently over the long term. Compare the features, benefits, contribution limits, tax treatment, and withdrawal rules before deciding. If you find it confusing, consider consulting a financial advisor.

2. Should I choose a tax-advantaged account for retirement savings?

Yes, a tax-advantaged retirement account can help you save more over the long run by reducing your tax burden. Make sure you understand the different tax treatments, contribution rules, and withdrawal rules before selecting a plan that best suits your retirement goals.