Planning for retirement is one of the most important steps in your financial journey. There are many options available—some offered through your employer and others you can establish on your own. The right mix will depend on your career, goals, and income. It’s important to remember that early withdrawals (typically before age 59½) may incur a 10% federal tax penalty, and required minimum distributions (RMDs) generally begin by April 1 of the year after you turn 73 (or 75 if you reach 73 after 2032). Below are some common retirement planning options.1
Defined Benefit Pensions
Often provided by employers, these plans guarantee a monthly income in retirement, based on your salary and years of service.
Money Purchase Plans
These employer-funded plans offer either a lump sum or monthly payouts. The benefit amount is tied to contributions made over time.
Profit-Sharing Plans
Funded by the employer, sometimes in connection with a 401(k), these plans link contributions to company performance. Employee contributions may be optional and tax-deductible.
401(k) and Savings Plans
These allow employees to save pre-tax dollars, often with employer matching. Funds grow tax-deferred and may be accessed as a lump sum or in payments at retirement.
Employee Stock Ownership Plans (ESOPs)
These plans provide company stock as part of your retirement benefit. They include options for diversifying a portion of your holdings once you reach a certain age and tenure.
403(b) Plans and Tax-Sheltered Annuities
Available to employees of nonprofits and educational institutions, these allow pre-tax contributions and offer flexible withdrawal options in retirement.
Individual Retirement Accounts (IRAs)
Traditional and Roth IRAs can be opened independently and offer tax advantages depending on your income and contribution type.
Self-Employed Retirement Plans
For those who are self-employed, plans like SEP IRAs, SIMPLE 401(k)s, and solo 401(k)s offer high contribution limits and flexible investment choices.
Simplified Employee Pensions (SEPs)
Designed for small business owners and their employees, SEPs are easy to administer and primarily funded by the employer.
SIMPLE IRAs and 401(k)s
Also for small businesses, SIMPLE plans require employer matching and let employees contribute pre-tax dollars toward retirement.
Supplemental Options: Annuities
Though not technically qualified retirement plans, annuities offer tax-deferred growth and can help supplement your retirement income. Be mindful of fees, surrender charges, and the financial strength of the issuing company when considering annuities.
Each of these options has different benefits, rules, and tax implications. A thoughtful retirement plan will often include a combination tailored to your personal goals and timeline. Let’s talk about what might be the right fit for your future.
Reach out to to learn more about your retirement planning options.
- IRS Publication 590-A (Contributions to Individual Retirement Arrangements)
LPL Financial and LPL representatives do not provide tax or legal advice. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
Contributions to a Roth IRA are taxed in the contribution year. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
