10 Best Retirement Plans You Should Know About

Over the past few decades, the US Congress has graciously established various retirement plans that offer great tax benefits to individuals and business owners who save and invest in them. Every retirement plan has different eligibility rules, withdrawal rules, as well as taxation treatment, which are crucial for retirement planning to ensure that you know the rules on how to access your investments when needed and shelter your investment gains from Uncle Sam as much as possible legally.

Once you learn how to build a retirement portfolio, it’s time to know where to build it and start executing. read on to learn about the best retirement plans that you should know about!

Best Retirement Plans Summary

Retirement Plans

Best Retirement Plans For Individuals

*Secure 2.0 brought some big changes surrounding the rules for retirement plan withdrawals in 2023. Read this article from CNBC to learn more.

1. Individual Retirement Account (IRA)

Quick facts

• One of the best retirement plans for individuals who want to supplement retirement savings and have flexibility over investments.
• Contributions are deductible. Meaning your taxable income is reduced by how much you contribute.
• Contribution limit = $7,000 ($8,000 for 50 years and older) in 2025.
• Investments in IRA grow tax-deferred, allowing you to compound your gains without paying taxes yet.
• You pay taxes on withdrawals at retirement.
• Can invest in a variety of things like stocks, bonds, real estate, mutual funds, ETFs, etc.

Who is eligible?

Any individual that has earned income. For example, money made from your job is considered earned income. However, a $500 gift from your parents does not count as earned income.

Contribution limits

1. Individuals can contribute up to $7,500/year in 2025.
   • $8,000 for individuals older than 50

Tax treatment

1. Contributions are deductible and can reduce your taxable income if you are below a certain income limit. If you already have an employer-sponsored retirement plan like a 401k, there’ll be income limits for how much tax deduction you can take. Check out the IRS website for more info on the income limits for tax deductions on contributions.
   • Can still make non-deductible contributions if you are above the income limit, just cannot take deductions.
2. Contributions and earnings grow tax-deferred until withdrawal in retirement.
3. When you withdraw money, you’ll have to pay taxes on contributions and earnings at your tax rate at the time of withdrawal.

Penalty treatment

1. You can withdraw money from the IRA penalty-free after age 59.5.
   • You may be charged a penalty of 10% if you choose to withdraw before that unless you qualify for certain exemptions.

Required Minimum Distribution (RMD)

1. If you are planning to hoard your money and let it grow tax-deferred indefinitely – not so fast.
   • Those with an IRA are required by law to start withdrawing the required minimum distribution (RMD) from the IRA when they reach age 73.
   • The deadline for the first RMD for those turning 73 in 2023 must take distributions no later than April 1, 2024.
     • More info on RMDs from the IRS here.

2. Roth IRA

Quick facts

• Individuals that are not high earners now and would rather pay taxes on contributions now at a lower tax bracket.
• Contributions are made with after-tax dollars and are non-deductible. Meaning your contributions are already taxed when you contribute to a Roth IRA and you will not receive a deduction.
• Must meet income limits to be eligible to contribute.
• Contribution limit = $7,000 ($8,000 for 50 years and older)
• Investments in Roth IRA grow tax-free.
• Withdrawals from Roth IRA at retirement are tax-free.
• Can withdraw contributions at any time penalty-free.

Who is eligible?

1. Any individual that has earned income and meets certain income limits.
2. Income Limits: For the year 2025, the income limit for those who file taxes as a single person is $165,000 (the amount you can contribute starts to phase out at $150,000); while those who file as married filing jointly is $246,000 (the amount you can contribute starts to phase out at $236,000). If you make more than that, you cannot contribute to a Roth IRA unless you do a Backdoor Roth IRA.

Contribution limits

Eligible Individuals can contribute up to $7,000/year ($8,000 for individuals older than 50) in 2025.

Tax treatment

1. Contributions are non-deductible. Meaning that the money you put into the Roth IRA is already taxed and cannot be used to reduce your taxable income.
2. Contributions and earnings grow tax-deferred.
3. Contributions and earnings withdrawn are tax-free after age 59.5 and if you had the Roth IRA for at least 5 years.

Penalty treatment

1. You can withdraw your contributions anytime penalty-free at any age.
2. You can withdraw earnings from the Roth IRA penalty-free after age 59.5.
   • You may be charged a penalty of 10% if you choose to withdraw before age 59.5 unless you qualify for certain exemptions.
   • If your contributions to your Roth IRA are a conversion from a traditional IRA or 401(k), you’ll have to wait 5 years from the conversion year to withdraw the funds penalty-free. This is to make sure that you don’t convert to a Roth IRA just to access your money penalty-free right away.

Required Minimum Distribution (RMD)

There is no RMD so you can leave your money in the Roth IRA to grow tax-free even after 72 years old!

3. Health Savings Account (HSA)

Quick facts

• Of all the best retirement plans, this one stands out for individuals who want to take advantage of the triple-tax savings for future medical bills.
• Contributions are tax-deductible, grow tax-deferred, and tax-free at withdrawal if used for qualified medical bills.
• Contribution limit = $4,300 for individuals and $8,550 for families. For those 55 and older, you can contribute an extra $1,000 annually.
• Earnings are tax-deferred and tax-free at withdrawal if used for qualified medical bills.
• Can invest in a variety of things like stocks, bonds, mutual funds, ETFs, etc.

Who is eligible?

1. You can only contribute to an HSA if you have a high-deductible health insurance plan. For 2025, the health plan must have a deductible of at least $1,400 for individuals and $2,800 for family plans.
   • A deductible is essentially what you need to pay out-of-pocket before health insurance kicks in.
2. There is also a maximum out-of-pocket amount of $7,000 for individuals and $14,000 for families.
   • Out-of-pocket expenses include deductibles, copayments, and other amounts, not including premiums.
3. Not enrolled in medicare.
4. Not covered by VA benefits.
5. Not claimed as a dependent on someone else’s tax return.
6. Don’t have an FSA.

Contribution limits

1. Individuals can contribute up to $4,300/year, with an additional $1,000 for those older than 55 in 2025.
2. Families can contribute up to $8,550/year, with an additional $1,000 for those older than 55 in 2025.

Tax treatment

1. Contributions are deductible and can reduce your taxable income.
2. Contributions and earnings grow tax-deferred and are tax-free if used for qualified medical expenses.
   • You can use the money anytime to pay for qualified medical expenses for yourself, your spouse, and your dependents tax-free. Qualified medical expenses include health, dental, vision, etc.
   • If you use the funds for non-qualified medical expenses, you’ll have to pay taxes on them.
3. Contributions and earnings used for non-qualified medical expenses will be taxed.

Penalty treatment

1. Most HSAs provide a debit card so you can just use it to access money.
2. End-of-year balances can be carried forward indefinitely.
3. If you use the funds for non-qualified medical expenses before age 65, you’ll have to pay taxes on it and a 20% penalty.
4. If you use the funds for non-qualified medical expenses after age 65, you’ll have to pay taxes on it but no penalty will be incurred.

Required Minimum Distribution (RMD)

There are no RMDs for HSA.

Best Retirement Plans For Employees

4. 401(k)

Quick facts

• Best for employees of for-profit companies that offer a match to contributions.
• Contributions are typically taken from your paycheck and are deductible. Meaning your taxable income is reduced by how much you contribute.
• Contribution Limits:
  • Employee Contributions: Employees can contribute up to $23,500 per year in 2025. IRS
    • Catch-Up Contributions:
      • Ages 50 and Older: Individuals aged 50 and above can make an additional catch-up contribution of $7,500, bringing their total contribution limit to $31,000. IRS
      • Ages 60 to 63: For individuals aged 60 to 63, the catch-up contribution limit increases to $11,250, allowing for a total contribution of $34,750. IRS
  • Total Contribution Limit (Employee + Employer): The combined limit for employee and employer contributions is $70,000 per year in 2025.
• Investments in a 401(k) grow tax-deferred, allowing you to compound your gains without paying taxes until withdrawal.
• You’ll need to pay taxes on withdrawals at retirement.
• Investment options are limited to what the plan provides.

Who is eligible?

• Employer will typically set certain eligibility requirements based on years of service and age.
• Generally must be offered to all employees at least 21 years old and who worked at least 1,000 hours in a previous year.

Contribution limits

1. Employees can contribute up to $23,500/year ($31,000 for individuals older than 50; $34,750 for 60-63 years old) in 2025.
2. The total employer and employee contribution limit is $70,000/year ($77,500 for individuals older than 50) in 2025.
3. The profit-sharing component of employer contributions is limited to 25% of an employee’s salary. This means that if your salary is $100,000, your employer can only contribute up to $25,000 to your 401(k).
4. Once an employee’s income exceeds $345,000, the employer cannot contribute anything above that.

Tax treatment

1. Contributions are deductible and can reduce your taxable income.
2. Contributions and earnings grow tax-deferred until withdrawal in retirement.
3. When you withdraw money, you’ll have to pay taxes on contributions and earnings at the tax rate at the time of withdrawal.

Penalty treatment

1. You can withdraw money from the 401k plan penalty-free after age 59.5.
   • You may be charged a penalty of 10% if you choose to withdraw before that unless you qualify for certain exemptions.

Required Minimum Distribution (RMD)

1. Required minimum distribution (RMD) is required at age 73.
2. The deadline for the first RMD for those turning 73 in 2025 must take distributions no later than April 1, 2026.
   • More info on RMDs from the IRS here.

5. Roth 401(k)

Quick facts

• Best for employees of for-profit companies that want tax-free growth on investments.
• Contributions are made with after-tax dollars and are not deductible.
• Employee contribution limit = $23,500 ($30,500 for 50 years and older; $34,750 for 60-63 years old) across your 401(k) and 403(b) if your employer offers both.
• Investments in a Roth 401(k) grow tax-free.
• Like a 401(k), RMD starts at age 73, unless you’re still working or a 50% owner of the company.

Who is eligible?

Employers will typically set certain eligibility requirements based on years of service and age. Not all employers provide a Roth 401(k) plan.

Contribution limits

1. Employee Contributions: Employees can contribute up to $23,500 per year in 2025. IRS
   • Catch-Up Contributions:
     • Ages 50 and Older: Individuals aged 50 and above can make an additional catch-up contribution of $7,500, bringing their total contribution limit to $31,000. IRS
     • Ages 60 to 63: For individuals aged 60 to 63, the catch-up contribution limit increases to $11,250, allowing for a total contribution of $34,750. IRS
2. Total Contribution Limit (Employee + Employer): The combined limit for employee and employer contributions is $70,000 per year in 2025.
3. Contributions made by the employer have to go to a pre-tax account like the traditional 401(k).
4. The total employer and employee contribution limit is $61,000/year ($67,500 for individuals older than 50) in 2025.
5. The profit-sharing component of employer contributions is limited to 25% of an employee’s salary. This means that if your salary is $100,000, your employer can only contribute up to $25,000 to your 401(k).

Tax treatment

1. Contributions are made with after-tax dollars and are non-deductible.
2. Contributions and earnings grow tax-deferred.
3. Contributions and earnings withdrawn are tax-free at retirement.

Penalty treatment

1. You can withdraw your contributions anytime penalty-free at any age.
2. You can withdraw contributions and earnings from the Roth IRA penalty-free and tax-free after age 59.5 and if you had the Roth IRA for at least 5 years.
   • You may be charged a penalty of 10% if you choose to withdraw before age 59.5 unless you qualify for certain exemptions.

Required Minimum Distribution (RMD)

Secure Act 2.0 says no RMD is required for Roth 401(k) starting in 2023!

6. 457(b)

Quick facts

• Best for employees of state and local governments, and certain non-profit organizations.
• Contributions are typically taken from your paycheck and are deductible. Meaning your taxable income is reduced by how much you contribute.
• Employee and employer contribution limit = $23,500 ($31,000 for 50 years and older)
• Investments in a 457(b) grow tax-deferred, allowing you to compound your gains without paying taxes until withdrawal.
• Can contribute to 457(b) max even if you have 401(k) or 403(b).
• You’ll need to pay taxes on withdrawals at retirement.
• Investment options are limited to what the plan provides.

Who is eligible?

Employer will typically set certain eligibility requirements based on years of service and age.

Contribution limits

1. Employee Contributions: Employees can contribute up to $23,500 per year in 2025. IRS
2. Catch-Up Contributions:
   • Ages 50 and Older: Individuals aged 50 and above can make an additional catch-up contribution of $7,500, bringing their total contribution limit to $31,000. IRS
   • Ages 60 to 63: For individuals aged 60 to 63, the catch-up contribution limit increases to $11,250, allowing for a total contribution of $34,750. IRS
3. Special 457(b) Catch-Up Provision:
   • Participants in 457(b) plans may be eligible for a special catch-up contribution, allowing them to contribute up to double the standard annual limit in the three years prior to their normal retirement age, potentially reaching $47,000 in 2025. Mission Square
4. Total Contribution Limit (Employee + Employer):
   • Unlike 401(k) and 403(b) plans, 457(b) plans do not have a combined employer and employee contribution limit; the limits apply solely to employee elective deferrals.
5. Employers can elect to match some or all of your contributions.

Tax treatment

1. Contributions are deductible and can reduce your taxable income.
2. Contributions and earnings grow tax-deferred until withdrawal in retirement.
3. When you withdraw money, you’ll have to pay taxes on contributions and earnings at the tax rate at the time of withdrawal.

Penalty treatment

1. You can withdraw money from the 457b plan penalty-free even before age 59.5 if you retire or leave your job.
   • You may be charged a penalty of 10% if you are still working for the employer and choose to withdraw before age 59.5 unless you qualify for certain exemptions.

Required Minimum Distributions (RMD)

1. Required minimum distribution (RMD) is required at age 73.
2. The deadline for the first RMD for those turning 73 in 2023 must take distributions no later than April 1, 2024.
   • More info on RMDs from the IRS here.

7. 403(b)

Quick facts

• Best for employees of public schools and tax-exempt organizations, ie. churches, hospitals, charities.
• Contributions are typically taken from your paycheck and are deductible. Meaning your taxable income is reduced by how much you contribute.
• Employee contribution limit = $23,500 ($31,000 for 50 years and older) across your 401(k) and 403(b) if your employer offers both.
• Investments in a 403(b) grow tax-deferred, allowing you to compound your gains without paying taxes until withdrawal.
• You’ll need to pay taxes on withdrawals at retirement.
• Investment options are limited to what the plan provides.
• Employer and employee contributions must vest immediately, meaning that you can access the money right away.

Who is eligible?

Employees of public schools and tax-exempt organizations, ie. churches, hospitals, and charities.

Contribution limits

1. Employee Contributions: Employees can contribute up to $23,500 per year in 2025. Fidelity
2. Catch-Up Contributions:
   • Ages 50 and Older: Individuals aged 50 and above can make an additional catch-up contribution of $7,500, bringing their total contribution limit to $31,000. Fidelity
   • Ages 60 to 63: For individuals aged 60 to 63, the catch-up contribution limit increases to $11,250, allowing for a total contribution of $34,750. Fidelity
3. Total Contribution Limit (Employee + Employer):
   • The combined limit for employee and employer contributions is $70,000 per year in 2025.
4. An employee that worked for a qualified organization for 15 years can contribute an additional $15,000 over 5 years.
5. Employers can elect to match some or all of your contributions.

Tax treatment

1. Contributions are deductible and can reduce your taxable income.
2. Contributions and earnings grow tax-deferred until withdrawal in retirement.
3. When you withdraw money, you’ll have to pay taxes on contributions and earnings at the tax rate at the time of withdrawal.

Penalty treatment

1. You can withdraw money from the 403(b) plan penalty-free after age 59.5.
   • You may be charged a penalty of 10% if you choose to withdraw before that unless you qualify for certain exemptions.

Required Minimum Distribution (RMD)

1. Required minimum distribution (RMD) is required at age 73.
2. The deadline for the first RMD for those turning 73 in 2023 must take distributions no later than April 1, 2024.
   • More info on RMDs from the IRS here.

Best Retirement Plans For Business Owners Or Self-Employed

8. Simplified Employee Pension (SEP IRA)

Quick facts

• Best for small business owners and self-employed individuals who want to contribute bigger sums of money to an IRA and deduct taxable income.
• Contributions are deductible. Meaning your taxable income is reduced by how much you contribute.
• Contribution limit = $70,000; no catch-up contributions.
• Investments in IRA grow tax-deferred, allowing you to compound your gains without paying taxes yet.
• You pay taxes on withdrawals at retirement.
• Can invest in a variety of things like stocks, bonds, real estate, mutual funds, ETFs, etc.
• Only the employer can contribute and the employer’s contributions are vested immediately.

Who is eligible?

1. Small-business owners and self-employed individuals with just a few employees.
2. For employees to participate:
   • At least 21 years old
   • Worked for the employer in at least 3 out of the past 5 years.
   • Earned at least $600 in compensation from the employer during the current year.

Contribution limits

1. Only employers can make contributions.
2. Employers that contribute to their own SEP IRA have to contribute the same percentage to employees.
3. Employers can contribute up to the lesser of 25% of salary or $70,000/year (no catch-up contributions allowed) in 2025.

Tax treatment

1. Contributions are deductible and can reduce your taxable income.
2. Contributions and earnings grow tax-deferred until withdrawal in retirement.
3. When you withdraw money, you’ll have to pay taxes on contributions and earnings at your tax rate at the time of withdrawal.

Penalty treatment

1. You can withdraw money from the IRA penalty-free after age 59.5.
   • You may be charged a penalty of 10% if you choose to withdraw before that unless you qualify for certain exemptions.

Required Minimum Distribution (RMD)

1. Required minimum distribution (RMD) is required at age 73.
2. The deadline for the first RMD for those turning 73 in 2023 must take distributions no later than April 1, 2024.
   • More info on RMDs from the IRS here.

9. Simple IRA

Quick facts

• Best for small business owners with 100 or fewer employees that want similar benefits to 401(k) plans but with fewer complications.
• Contributions are deductible. Meaning your taxable income is reduced by how much you contribute.
• Contribution limit = $16,500 ($20,000 for those 50 and older) in 2025.
• Investments in the IRA grow tax-deferred, allowing you to compound your gains without paying taxes yet.
• You pay taxes on withdrawals at retirement.
• Can invest in a variety of things like stocks, bonds, real estate, mutual funds, ETFs, etc.
• Employer’s contributions are vested immediately.

Who is eligible?

1. Employees (including self-employed individuals) who:
   • Earned at least $5,000 in compensation during any 2 years before the current calendar year.
   • Expects to earn at least $5,000 in compensation for the current calendar year.

*Employers can use less restrictive requirements for eligibility.

Contribution limits

1. Employees can contribute up to $16,500/year ($20,000 for individuals older than 50) in 2025.
2. Employers can elect to either:
   • Match 2% of the employee’s salary no matter if the employee contributes, or
   • Match employee’s contributions, up to 3% of employee’s salary.

Tax treatment

1. Contributions are deductible and can reduce your taxable income.
2. Contributions and earnings grow tax-deferred until withdrawal in retirement.
3. When you withdraw money, you’ll have to pay taxes on contributions and earnings at your tax rate at the time of withdrawal.

Penalty treatment

1. You can withdraw money from the IRA penalty-free after age 59.5.
   • You may be charged a penalty of 10% if you choose to withdraw before that unless you qualify for certain exemptions.
   • If withdrawal occurs within 2 years of participation, a penalty of 25% will be imposed.

Required Minimum Distribution (RMD)

1. Required minimum distribution (RMD) is required at age 73.
2. The deadline for the first RMD for those turning 73 in 2023 must take distributions no later than April 1, 2024.
   • More info on RMDs from the IRS here.

10. Solo 401k

Quick facts

• One of the best retirement plans for self-employed individuals with no employees who want to enjoy the full benefits of a 401(k) plan.
• Contributions are deductible. Meaning your taxable income is reduced by how much you contribute.
• Contribution limit = $70,000 ($77,500 for individuals older than 50) in 2025.
• Investments grow tax-deferred, allowing you to compound your gains without paying taxes yet.
• You pay taxes on withdrawals at retirement.
• Employer’s and employee’s contributions are vested immediately.

Who is eligible?

A self-employed individual with no employees.

Contribution limits

1. You are an employer and employee for the Solo 401(k).
2. Employee (Elective) Contributions:
   • Under Age 50: You can contribute up to $23,500 in pre-tax or Roth (after-tax) dollars.
   • Ages 50-59 and 64+: Eligible for an additional catch-up contribution of $7,500, totaling $31,000.
   • Ages 60-63: Eligible for a higher catch-up contribution of $11,250, allowing a total of $34,750.
3. Employer (Profit-Sharing) Contributions:
   • As the employer, you can contribute up to 25% of your compensation.
   • For self-employed individuals, this calculation is based on net self-employment income after deducting half of your self-employment tax and elective deferrals.
4. Total Contribution Limit:
   • Under Age 50: The combined total of employee and employer contributions cannot exceed $70,000.
   • Ages 50-59 and 64+: The limit increases to $77,500, including catch-up contributions.
   • Ages 60-63: The limit is $81,250, reflecting the higher catch-up contribution.
5. Additional Considerations:
   • Compensation Cap: The maximum compensation that can be considered for contribution calculations is $350,000 in 2025.
6. You as an employer can contribute up to the lesser of 25% of your salary or up to the total employer+employee contribution of $70,000/year ($77,500 for individuals older than 50) in 2023.

Tax treatment

1. Contributions are deductible and can reduce your taxable income.
2. Contributions and earnings grow tax-deferred until withdrawal in retirement.
3. When you withdraw money, you’ll have to pay taxes on contributions and earnings at your tax rate at the time of withdrawal.

Penalty treatment

1. You can withdraw money from the IRA penalty-free after age 59.5.
   • You may be charged a penalty of 10% if you choose to withdraw before that unless you qualify for certain exemptions.

Required Minimum Distribution (RMD)

1. Required minimum distribution (RMD) is required at age 73.
2. The deadline for the first RMD for those turning 73 in 2023 must take distributions no later than April 1, 2024.
   • More info on RMDs from the IRS here.

Final Thoughts

Choosing the right retirement plan is crucial in planning for retirement. This is because it will greatly affect how you can invest tax efficiently and save a lot of money in taxes. Knowing how and what to invest in is just as important as where to invest in.

As the tax laws for retirement plans are always changing, it is important to research each plan thoroughly to make sure the information is up-to-date before making any major moves. Please do consult a financial and tax advisor to find out which one works best for you as well!

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The opinions expressed in this article are for general information purposes only and are not intended to provide specific advice or recommendations about any investment product or security. If you have questions pertaining to your individual situation you should consult your financial advisor.