<div><div><p>Saving for retirement is a crucial part of everyone’s financial planning.  I’ve <span><a data-ga="[[&quot;Embedded Url&quot;,&quot;External link&quot;,&quot;https://lifehacker.com/why-you-need-multiple-savings-accounts-1797235748&quot;,{&quot;metric25&quot;:1}]]" href="https://lifehacker.com/why-you-need-multiple-savings-accounts-1797235748" rel="noopener noreferrer" target="_blank">recommended before</a></span> that dividing your money into multiple accounts helps you see all your saving goals separately. A big part of that is taking advantage of retirement-specific accounts in order to invest in your future. So, how can different types of accounts serve your retirement goals? Here’s a basic overview of the primary retirement accounts you should have depending on your employment situation, income, and retirement goals.</p><h2 id="h19848"><a id=""></a>401(k)</h2><p>A 401(k) is an employer-sponsored retirement account that allows you to contribute pre-tax dollars from each paycheck toward retirement. With a 401(k), the money you set aside isn’t just saved, but invested. You have the option of investing in a variety of assets like stocks, bonds, and mutual funds. Your funds get stashed away tax-free until you withdraw it, ideally after years and years of growth. </p><p>Many employers will match your contributions up to a certain percentage. The money grows tax-deferred until you start making withdrawals in retirement. Take full advantage of any employer match offered—it’s free money toward retirement.</p><p>If your workplace offers a <span><a data-ga="[[&quot;Embedded Url&quot;,&quot;External link&quot;,&quot;https://lifehacker.com/a-beginner-s-guide-to-starting-a-401-k-1592233003&quot;,{&quot;metric25&quot;:1}]]" href="https://lifehacker.com/a-beginner-s-guide-to-starting-a-401-k-1592233003" rel="noopener noreferrer" target="_blank">401(k)</a></span>, you might hear the common wisdom to contribute 10% to 20% of your paycheck. However, it might be wiser to first contribute up to the match, then max out a Roth IRA, and then come back to the 401(k) to hit your overall retirement savings goal. I’ll explain more below, but first, let’s take a look at IRAs.</p><h2 id="h19849"><a id=""></a>Traditional and Roth IRAs</h2><p>An individual retirement account (IRA) is a personal retirement account you open yourself. There are two main types of IRAs: Traditional and Roth. In the simplest terms, with Roth IRAs, you pay taxes on your savings now. With traditional IRAs, you pay taxes later. We’ve written about the differences in more detail <span><a data-ga="[[&quot;Embedded Url&quot;,&quot;External link&quot;,&quot;https://lifehacker.com/a-beginner-s-guide-to-opening-an-ira-1607498930&quot;,{&quot;metric25&quot;:1}]]" href="https://lifehacker.com/a-beginner-s-guide-to-opening-an-ira-1607498930" rel="noopener noreferrer" target="_blank">here</a></span>, and <span><a data-ga="[[&quot;Embedded Url&quot;,&quot;External link&quot;,&quot;https://lifehacker.com/why-millennials-and-gen-zers-should-be-investing-in-rot-1847753911&quot;,{&quot;metric25&quot;:1}]]" href="https://lifehacker.com/why-millennials-and-gen-zers-should-be-investing-in-rot-1847753911" rel="noopener noreferrer" target="_blank">we generally lean pro-Roth</a></span> over traditional.</p><p>IRAs have lower contribution limits than 401(k)s, but are still great supplemental retirement savings. There is no limit to the number of traditional individual retirement accounts, or IRAs, you can establish. However, if you establish multiple IRAs, you cannot contribute more than the contribution limits across all your accounts in a given year. The annual contribution limit for a Roth IRA in 2023 is <strong>$6,500 if you’re under age 50, and $7,500 if you’re 50 or older</strong>. You can and <em>should </em><span><a data-ga="[[&quot;Embedded Url&quot;,&quot;External link&quot;,&quot;https://lifehacker.com/should-you-max-out-your-retirement-contributions-early-1827688691&quot;,{&quot;metric25&quot;:1}]]" href="https://lifehacker.com/should-you-max-out-your-retirement-contributions-early-1827688691" rel="noopener noreferrer" target="_blank">max out those limits</a></span>, if possible.</p><p>Now, back to the 401(k) versus IRA order of operations. When you withdraw money from your 401k, you’ll have to pay taxes on the growth—which should hopefully be significant, especially if you began investing in your early 20s. But with a Roth IRA, you won’t be taxed on the growth later, because you were already taxed on that money before you stashed it away. This means it’s wise to make the most of your tax-free Roth growth and always prioritize maxing out it out. Then, direct any remaining funds necessary to your 401(k) to hit an overall retirement savings goal of 10-20% of your income. </p><h3 id="h19850"><a id=""></a>Other types of IRAs</h3><p>There are also SEP IRAs for self-employed or small business owners to provide retirement benefits for themselves. These have higher contribution limits than traditional and Roth IRAs, but all the contributions are by the employer, not by any employees. Similarly, a SIMPLE IRA plan (Savings Incentive Match PLan for Employees) allows employees and employers to contribute to traditional IRAs set up for employees.</p><p>If you or your spouse aren’t receiving taxable income, one of you might consider <span><a data-ga="[[&quot;Embedded Url&quot;,&quot;External link&quot;,&quot;https://lifehacker.com/who-should-consider-a-spousal-ira-according-to-a-finan-1849367523&quot;,{&quot;metric25&quot;:1}]]" href="https://lifehacker.com/who-should-consider-a-spousal-ira-according-to-a-finan-1849367523" rel="noopener noreferrer" target="_blank">setting up a spousal IRA</a></span>. This way, you don’t have to miss out on tax-deferred growth and retirement assets in your name just because you aren’t in the traditional workforce.</p><h2 id="h19851"><a id=""></a>HSA</h2><p>If you have a high deductible health plan, you can open a health savings account (HSA). This allows you to make pre-tax contributions that you can use toward qualified medical expenses. Any money not used for medical expenses can be invested, and it compounds tax-free. HSAs have become a popular retirement savings vehicle.</p><h2 id="h19852"><a id=""></a>Annuities</h2><p>Annuities are insurance contracts that provide guaranteed lifetime income in retirement. You pay a lump sum or series of payments to an insurance company and begin receiving fixed payments at a future date. There are various types of annuities with differing pros and cons. They can provide income you can’t outlive; but they also have high upfront costs and you have limited access to your funds.</p><h2 id="h19853"><a id=""></a>The bottom line</h2><p>With the right retirement accounts, you can grow your nest egg and be prepared for your post-work years. The key is to start saving early (<span><a data-ga="[[&quot;Embedded Url&quot;,&quot;External link&quot;,&quot;https://lifehacker.com/these-numbers-will-convince-your-teen-to-start-saving-f-1850144908&quot;,{&quot;metric25&quot;:1}]]" href="https://lifehacker.com/these-numbers-will-convince-your-teen-to-start-saving-f-1850144908" rel="noopener noreferrer" target="_blank">compound interest rules</a></span>!) and utilize a mix of these accounts to build your retirement funds. Here are our guides to <span><a data-ga="[[&quot;Embedded Url&quot;,&quot;External link&quot;,&quot;https://lifehacker.com/a-beginner-s-guide-to-opening-an-ira-1607498930&quot;,{&quot;metric25&quot;:1}]]" href="https://lifehacker.com/a-beginner-s-guide-to-opening-an-ira-1607498930" rel="noopener noreferrer" target="_blank">opening an IRA</a></span> and <span><a data-ga="[[&quot;Embedded Url&quot;,&quot;External link&quot;,&quot;https://lifehacker.com/a-beginner-s-guide-to-starting-a-401-k-1592233003&quot;,{&quot;metric25&quot;:1}]]" href="https://lifehacker.com/a-beginner-s-guide-to-starting-a-401-k-1592233003" rel="noopener noreferrer" target="_blank">opening a 401(k)</a></span>. And outside of retirement-specific savings, here’s <span><a data-ga="[[&quot;Embedded Url&quot;,&quot;External link&quot;,&quot;https://lifehacker.com/all-the-different-saving-accounts-you-need-1850122921&quot;,{&quot;metric25&quot;:1}]]" href="https://lifehacker.com/all-the-different-saving-accounts-you-need-1850122921" rel="noopener noreferrer" target="_blank">my guide to the different types of saving vehicles</a></span> you may need.</p></div></div>