Guides / Saving
Retirement account basics
Retirement accounts give tax advantages for long-term saving. This guide explains how the main US account types work. It is education, not investment advice.
The key ideas
- Employer plans
- A 401(k), 403(b) or similar plan lets you save from each paycheck. If your employer offers a match, contributing enough to get the full match is often described as "free money".
- IRAs
- Individual retirement accounts you open yourself at a bank or brokerage. Contribution limits and income rules are set by the IRS and change over time, so check irs.gov for the current year.
- Traditional vs Roth
- Traditional contributions may lower your taxes now, with withdrawals taxed later. Roth contributions are made with after-tax money, and qualified withdrawals are tax-free.
- Early withdrawals
- Taking money out before the eligible age can mean taxes and penalties, with some exceptions.
- Fees matter
- Fund expense ratios and account fees compound over decades. Ask what you are paying.
Questions to ask yourself
- Does my employer match contributions, and how much?
- What fees am I paying inside my plan?
- Would I benefit from talking with a fee-only fiduciary adviser about my situation?
Free help
- IRS retirement plans pages
- Current contribution limits and rules at irs.gov/retirement-plans.
- FINRA BrokerCheck and SEC IAPD
- Check a financial professional's background and registration before you work with them.
This guide is general education for US households, based on how things typically work. Rules, rates and program details change and vary by lender and state. It is not individual financial, legal or tax advice, and it isn't an offer of credit. Pennies & More isn't paid by any lender or company mentioned here.