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To help ensure you have a financially secure retirement, it’s wise to create a plan early in life — or right now if you haven’t already done so. By diverting a portion of your paycheck into a tax-advantaged retirement savings plan, for example, your wealth can grow exponentially to help you achieve peace of mind for those so-called golden years.

Retirement benefits are so important that they should be a top consideration when you’re shopping for a new job. Yet only about half of current employees understand the benefits offered to them, according to a January 2019 survey from the Employee Benefit Research Institute.

“Plan design is individualized, so one company’s benefit formula may not be as generous as others,” explains David Littell, professor of taxation and retirement planning expert at The American College of Financial Services. “It’s really important that you read the summary plan description that is provided to all participants so that you can understand the design of the plan.”

Key plan benefits to consider

Virtually all retirement plans offer a tax advantage, whether it’s available upfront during the savings phase or when you’re taking withdrawals. For example, 401(k) contributions are made with pre-tax dollars, which reduces your taxable income. Roth IRAs, in contrast, are funded with after-tax dollars but withdrawals are tax-free.




The best retirement plans to consider in 2019:

1. Defined contribution plans

Since their introduction in the early 1980s, defined contribution (DC) plans, which include 401(k)s, have all but taken over the retirement marketplace. Roughly 84 percent of Fortune 500 companies offer DC plans rather than traditional pensions. 

The 401(k) plan is the most ubiquitous DC plan among employers of all sizes, while the similarly structured 403(b) plan is offered to employees of public schools and certain tax-exempt organizations, and the 457(b) plan is most commonly available to state and local governments. 



401(k) plans

A 401(k) plan is a tax-advantaged plan that offers a way to save for retirement. An employee contributes to the plan with pre-tax wages, meaning contributions are not considered taxable income. The 401(k) plan allows these contributions to grow tax-free until they’re withdrawn at retirement. At retirement, distributions create a taxable gain, though withdrawals before age 59 ½ may be subject to taxes and additional penalties. 

Pros: A 401(k) plan can be an easy way to save for retirement, because you can schedule the money to come out of your paycheck and be invested automatically. The money can be invested in a number of high-return investments such as stocks, and you won’t have to pay tax on the gains until you withdraw the funds. In addition, many employers offer you a match on contributions, giving you free money – and an automatic gain – just for saving.  

Cons: One key disadvantage of 401(k) plans is that you may have to pay a penalty for accessing the money if you need it for an emergency. While many plans do allow you to take loans from your funds for qualified reasons, it’s not a guarantee that your employer’s fund will do that. Your investments are limited to the funds provided in your employer’s 401(k) program, so you may not be able to invest in what you want to.  

What it means to you: A 401(k) plan is one of the best ways to save for retirement, and if you can get bonus “match” money from your employer, you can save even more quickly. 

403(b) plans

A 403(b) plan is much the same as a 401(k) plan, but it’s offered by public schools, charities and some churches, among others. The employee contributes pre-tax money to the plan, so contributions are not considered taxable income, and these funds can grow tax-free until retirement. At retirement, withdrawals create a taxable gain, and distributions before age 59 ½ may create additional taxes and penalties.  

Pros: A 403(b) is an effective and popular way to save for retirement, and you can schedule the money to be automatically deducted from your paycheck, helping you to save more effectively. The money can be invested in a number of investments, including annuities or high-return assets such as stock funds, and you won’t have to pay taxes until you withdraw the money. Some employers may also offer you a matching contribution if you save money in a 403(b). 

Cons: Like the 401(k), the money in a 403(b) plan can be difficult to access unless you have a qualified emergency. While you may still be able to access the money without an emergency, it may cost you additional penalties and taxes, though you can also take a loan from your 403(b). Another downside: you may not be able to invest in what you want, since your options are limited to the plan’s investment choices.   

What it means to you: A 403(b) plan is one of the best ways for workers in certain sectors to save for retirement, especially if they can receive any matching funds. 

457(b) plans

A 457(b) plan is similar to a 401(k), but it’s available only for employees of state and local governments and some tax-exempt organizations. In this tax-advantaged plan, an employee can contribute to the plan with pre-tax wages, which means the income is not taxed. The 457(b) allows contributions to grow tax-free until retirement, and when the employee withdraws money, it becomes taxable. 

Pros: A 457(b) plan can be an effective way to save for retirement, because of its tax advantages. The plan offers some special catch-up savings provisions for older workers that other plans don’t offer, as well. The 457(b) is considered a supplemental savings plan, and so withdrawals before age 59 ½ are not subject to the 10 percent penalty that 401(k) plans are. 

Cons: The typical 457(b) plan does not offer an employer match, which makes it much less attractive than a 401(k) plan. Also, it’s even tougher to take an emergency withdrawal from a 457(b) plan than from a 401(k).  

What it means to you: A 457(b) plan can be a good retirement plan, but it does offer some drawbacks, compared to other defined contributions plans. And by offering withdrawals before the typical retirement age of 59 ½ without an additional penalty, the 457(b) can be beneficial for retired public servants who may have a physical disability and need access to their money. 

2. IRA plans

An IRA is a valuable retirement plan created by the U.S. government to help workers save for retirement. Individuals can contribute up to $6,000 to an account in 2019, and workers over age 50 can contribute up to $7,000. 

There are many kinds of IRAs, including a traditional IRA, Roth IRA, spousal IRA, rollover iRA, SEP IRA and SIMPLE IRA. Here’s what each is and how they differ from one another. 

Traditional IRA 

A traditional IRA is a tax-advantaged plan that allows you significant tax breaks while you save for retirement. Anyone who earns money by working can contribute to the plan with pre-tax dollars, meaning any contributions are not taxable income. The IRA allows these contributions to grow tax-free until the account holder withdraws them at retirement and they become taxable. Earlier withdrawals may leave the employee subject to additional taxes and penalties.   

Pros: A traditional IRA is a very popular account to invest for retirement, because it offers some valuable tax benefits, and it also allows you to purchase an almost-limitless number of investments – stocks, bonds, CDs, real estate and still other things. Perhaps the biggest benefit, though, is that you won’t owe any tax until you withdraw the money at retirement.  

Cons: If you need your money from a traditional IRA, it can be costly to remove it, because of taxes and additional penalties. And an IRA requires you to invest the money yourself, whether that’s in a bank or in stocks or bonds or something else entirely. You’ll have to decide where and how you’ll invest the money, even if that’s only to ask an adviser to invest it.  

What it means to you: A traditional IRA is one of the best retirement plans around, though if you can get a 401(k) plan with a matching contribution, that’s somewhat better. But if your employer doesn’t offer a defined contribution plan, then a traditional IRA is available to you instead — though the tax deductibility of contributions is eliminated at higher income levels.  

Roth IRA

A Roth IRA is a newer take on a traditional IRA, and it offers substantial tax benefits. Contributions to a Roth IRA are made with after-tax money, meaning you’ve paid taxes on money that goes into the account. In exchange, you won’t have to pay tax on any contributions and earnings that come out of the account at retirement. 

Pros: The Roth IRA offers several advantages, including the special ability to avoid taxes on all money taken out of the account in retirement, at age 59 ½ or later. The Roth IRA also provides lots of flexibility, because you can often take out contributions – but not earnings – at any time without taxes or penalties. This flexibility actually makes the Roth IRA a great retirement plan option. 

Cons: As with a traditional IRA, you’ll have full control over the investments made in a Roth IRA. And that means you’ll need to decide how to invest the money or have someone do that job for you. There are income limits for contributing to a Roth IRA, though there’s a back-door way to get money into one.  

What it means to you: A Roth IRA is an excellent choice for its huge tax advantages, and it’s an excellent choice if you’re able to grow your earnings for retirement and keep the taxman from touching it again. 

Spousal IRA

IRAs are normally reserved for workers who have earned income, but the spousal IRA allows the spouse of a worker with earned income to fund an IRA as well. The working spouse’s taxable income must be more than the contributions made to any IRAs. Your spousal IRA can either be a traditional IRA or a Roth IRA. 

Pros: The biggest positive of the spousal IRA is that it allows a non-working spouse to take advantage of an IRA’s various benefits, either the traditional or Roth version.

Cons: There’s not a particular downside to a spousal IRA, though like all IRAs, you’ll have to decide how to invest the money. 

What it means to you: The spousal IRA allows you to take care of your spouse’s retirement planning without forcing your partner to have earned income as would usually be the case. That allows your spouse to stay home and take care of other family needs. 

Rollover IRA

A rollover IRA is created when you move a retirement account such as a 401(k) or IRA to a new IRA account. You “roll” the money from one account to the rollover IRA, and can still take advantage of the tax benefits of an IRA. You can establish a rollover IRA at any institution that allows you to do so, and the rollover IRA can be either a traditional IRA or a Roth IRA. There’s no limit to the amount of money that can be transferred into a rollover IRA. 

A rollover IRA also allows you to change the type of retirement account, from a traditional IRA to a Roth IRA, or vice versa. You’ll create a rollover IRA account to move the money into and then make the transfer. Certain types of transfers can create tax liabilities, however, so it’s important to understand these consequences before you decide how to proceed.  

Pros: A rollover IRA allows you to continue to take advantage of attractive tax benefits, if you decide to leave a former employer’s 401(k) plan for whatever reason. If you simply want to change IRA providers for an existing IRA, you can roll over your account to a new provider. As in all IRAs, you can buy a wide variety of investments. 

Cons: Like all IRAs, you’ll need to decide how to invest the money, and that may cause problems for some people. You should pay special attention to any tax consequences for rolling over your money, because they can be substantial, but this is generally only an issue if you’re changing your account type. 

What it means to you: A rollover IRA is a convenient way to move from a 401(k) or an IRA to another IRA account. The rollover IRA may be able to improve your financial situation by offering you a chance to change IRA types from traditional to Roth or vice versa.  


The SEP IRA is set up like a traditional IRA, but for small business owners and their employees. Only the employer can contribute to this plan, and contributions go into a SEP IRA for each employee rather than a trust fund. Self-employed individuals can also set up a SEP IRA.





What it means to you: Accountholders are still tasked with making investment decisions. Resist the temptation to break open the account early. If you tap the money before age 59 ½, you’ll likely have to pay a 10 percent penalty on top of income tax.


With 401(k) plans, employers have to pass several non-discrimination tests each year to make sure that highly compensated workers aren’t contributing too much to the plan relative to the rank and file.

The SIMPLE IRA bypasses those requirements because the same benefits are provided to all employees. The employer has a choice of whether to contribute a 3 percent match or make a 2 percent non-elective contribution even if the employee saves nothing in his or her own SIMPLE IRA.




3. Solo 401(k) plan


Because the business owner is both the employer and employee, elective deferrals of up to $19,000 can be made, plus a non-elective contribution of up to 25 percent of compensation up to $56,000 for incorporated businesses, not including catch-up contributions. The limit for unincorporated businesses is 20 percent, says Littell.




4. Pensions






What it means to you: Since company pensions are increasingly rare and valuable, if you are fortunate enough to have one, leaving the company can be a major decision. Should you stay or should you go? It depends on the financial strength of your employer, how long you’ve been with the company and how close you are to retiring. You can also factor in your job satisfaction and whether there are better employment opportunities elsewhere.

5. Guaranteed income annuities








6. Profit-sharing plans






7. The Federal government plan


  •       A basic defined benefit plan
  •       Social Security
  •       The Thrift Savings Plan, or TSP



Pros: Federal employees are eligible for the defined benefit plan. Plus they can get a 5 percent employer contribution to the TSP, which includes a 1 percent non-elective contribution, a dollar-for-dollar match for the next 3 percent and a 50 percent match for the next 2 percent contributed. 



What it means to you: You still need to decide how much to contribute, how to invest, and whether to make the Roth election. However, it makes a lot of sense to contribute at least 5 percent of your salary to get the maximum employer contribution.

8. Cash-balance plans






What it means to you: The date you retire will impact your benefit. “Retiring early can truncate your benefit,” says Littell. Working longer is more advantageous. Also, you’ll get to choose from a lump sum or an annuity form of benefit. When given the option between a $200,000 lump sum or a monthly annuity check of $1,000 for life, “too many people,” choose the lump sum when they’d be better off getting the annuity for life, says Littell.

If you’re married and don’t want to leave your spouse in the lurch — in the event you pre-decease him or her — consider a joint-life annuity rather than a single-life annuity.

9. Cash-value life insurance plan

Some companies offer insurance vehicles as a benefit.






10. Nonqualified deferred compensation plans (NQDC)







—  Bankrate’s James Royal contributed to the update of this story.