Here are 6 retirement fund options available for you as an American worker

Retirement planning is a vital step you must take in your career to ensure that you have a stable financial standing and a comfortable financial future once you quit working. Retirement funds are a great way for you to plan ahead for your retirement days. There are different types of retirement fund options available for Americans. Today, we will discuss various retirement fund options that you can consider for your future.

401(k) Plans

401(k) is a retirement plan that employers offer for you, as an American worker. With a 401(k) plan, you are able to save a sum of your pre-tax income in a tax-deferred account. Some employers also match a certain percentage of the contribution you make to your 401(k). Your contribution to the fun will be reduced from your paycheck before the taxes are deducted, enabling you to lower the taxable income. You can let the funds in your 401(k) plan grow tax-free until you withdraw it at retirement.

Traditional IRAs

IRA stands for Individual Retirement Account. These are a type of savings account. With a traditional IRA, you will be able to invest capital in stocks, bonds, and mutual funds, among many others. This retirement fund option also allows you to reduce your taxable income because IRAs are tax-deductible. You can again let the money in your traditional IRA grow tax-free. Once you withdraw it on your retirement, it will be taxed as an income.

Roth IRAs

This is another type of retirement fund that is quite similar to traditional IRAs. The difference between a traditional IRA and a Roth IRA is that you can contribute after-tax dollars to your Roth IRA. Therefore, Roth IRAs are not tax-deductible. You can let the money in your Roth IRA grow tax-free. Once you withdraw the money you have in your Roth IRA after retirement, it will not be taxed as income. If you plan to be in a higher tax bracket than you are now when you retire, a Roth IRA is an option that you must consider.

SEP IRAs

SEP stands for Simplified Employee Pension. This is a type of retirement fund option available for small business owners and self-employed workers. These plans also work similarly to traditional IRAs. However, with a SEP IRA, you will have a higher contribution limit. If you are looking for a way to save more money for your retirement, this is an ideal option for you. You can make tax-deductible contributions to your SEP IRA. You will be able to grow the money in your fund tax-free until you withdraw it.

SIMPLE IRAs

SIMPLE stands for Savings Incentive Match Plan for Employees. This is a retirement fund option available for small businesses with 100 or fewer employees. You will be making tax-deductible contributions to your SIMPLE IRA, which will grow tax-free in your account. You can easily set up and administer a SIMPLE IRA. However, the contribution limit to this account type is lower than that of others.

Defined Benefit Plans

Defined benefit plans are also known as pension plans. These retirement plans will provide you with a guaranteed income during your retirement. These are a type of retirement fund option that’s offered by government entities and large corporations. The amount of your retirement benefits will be calculated using a formula that considers your salary history and years of service. Instead of you contributing to the plan as an employee, your employer will be the one making contributions here.