Retirement Plans

Traditional 401(k) / 403(b)

Stock Description: Employer-Sponsored Plans. Set up by your workplace (401k for for-profit, 403b for non-profit/education).

Tax Advantage: Explanation: Tax Deduction NOW (Pay Tax LATER). Contributions are made pre-tax, immediately reducing your current taxable income. All withdrawals in retirement are taxed as ordinary income.

Key Feature: Explanation: Employer Match. This is essential free money. Many employers match a portion of your contribution (e.g., 50% or 100% match up to a certain percentage of your salary).

Contribution Limit: Explanation: Highest limits among the common options (e.g., $23,000 for 2025, plus catch-up contributions for age 50+).

Best For: Explanation: Individuals who anticipate being in a lower tax bracket in retirement than they are currently.

Major Provider: Explanation: Fidelity Investments, Vanguard.

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Roth IRA

Stock Description: Individual Retirement Account with Tax-Free Growth. Opened by you at a brokerage, independent of your employer.

Tax Advantage: Explanation: Pay Tax NOW (Tax-Free LATER). Contributions are made post-tax (after income taxes). All qualified investment growth and withdrawals in retirement are 100% tax-free.

Key Feature: Explanation: Tax-Free Earnings & Flexible Access. Contributions can be withdrawn at any time, for any reason, without tax or penalty. Earnings, however, must follow the age 59½ and 5-year rules. No Required Minimum Distributions (RMDs) during your lifetime.

Contribution Limit: Explanation: Lower limits (e.g., $7,000 for 2025, plus catch-up contributions). Eligibility is phased out above certain income levels.

Best For: Explanation: Young investors, or individuals who anticipate being in a higher tax bracket in retirement.

Major Provider: Explanation: Charles Schwab, Robinhood.

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Traditional IRA

Stock Description: Individual Retirement Account with Upfront Deduction. Opened by you at a brokerage.

Tax Advantage: Explanation: Tax Deduction NOW (Pay Tax LATER). Contributions may be tax-deductible, reducing your current tax bill, but deductibility can be limited based on income and whether you have a workplace plan. Withdrawals in retirement are taxed.

Key Feature: Explanation: Independent Savings. A primary option for those who are self-employed or whose employer does not offer a 401(k). It offers a way to get a current tax break if you qualify.

Contribution Limit: Explanation: Same limits as the Roth IRA (e.g., $7,000 for 2025, plus catch-up contributions).

Best For: Explanation: People focused on maximizing their tax deduction today, or high-income earners who are ineligible to contribute to a Roth IRA directly.

Major Provider: Explanation: Vanguard, E*TRADE.

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Retirement Plans

Traditional 401(k) / 403(b)

Roth IRA

Traditional IRA

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