There are many different tax-advantaged retirement accounts, but the alphabet and number soup can be confusing.
Some of those account structures are available for workers in certain situations. For example, a private-sector worker generally has different qualified account options than a state government worker. Other types of accounts are available to self-employed workers, and some can be used in combination.
Here’s a look at some of these account options.
401(k)
A 401(k) is one of the most common tax-advantaged retirement accounts, typically offered through large or midsize employers.
For tax year 2025, plan participants may contribute up to $23,500. Workers over 50 are allowed an additional $7,500 as a catch-up contribution. For employees between the ages of 60 and 63, the catch-up contribution limit is $11,250. In addition, your employer may match a certain portion of your contributions.
You typically face penalties if you withdraw money from your account before you turn 59 1/2.
Growth of investments in the plan can be tax-deferred using the traditional 401(k) or tax-free with a Roth 401(k) option if available.
“For higher-earning employees, using the traditional 401(k) will give an immediate tax benefit of lowering taxable income, while others will benefit from paying taxes today at lower rates and allowing the investments to grow tax-free,” said Rob Burnette, investment advisor representative at Outlook Financial Center in Troy, Ohio, in an email.
[Related:How to Save in a 401(k) and IRA in the Same Year]
Solo 401(k)
For a self-employed business owner without full-time workers, a solo 401(k) can be an effective way to reduce taxable income and save for retirement.
In 2025, solo 401(k) savers age 50 and under may contribute up to $70,000. If you are between the ages of 50 and 59 — or age 64 or older — you may contribute as much as $77,500. The limit for savers between 60 and 63 is $81,250.
While that’s more than you can save in an employer-sponsored plan, there are some tradeoffs.
“The solo 401(k) does have some administrative obligations that can make it slightly more cumbersome to save than other vehicles,” Renn Williams, partner and retirement plan advisor at for Advo(k)ate Advisors in Birmingham, Alabama, said in an email.
However, he added, in addition to the higher savings limits, the solo 401(k) offers flexibility that other options may not have. “If someone has a business, even as a side gig, and they are the only employee, a solo 401(k) is something that should be discussed with a tax or financial advisor,” Williams said.
403(b)
If you work at a nonprofit or tax-exempt organization, you may be eligible to participate in a 403(b) plan. The contribution limits are the same as for a 401(k).
Today, 403(b) plans have fund choices similar to those found in 401(k)s, but that wasn’t always the case.
“Unfortunately, many 403(b) participants have let their retirement assets remain in old-school individual annuity contracts that are becoming less common because of their high expense and lack of flexibility,” Williams said.
Williams suggested that employees who retire from or leave a 403(b) employer consider rolling the funds over to an individual retirement account to avoid potentially high expenses.
457(b)
A 457(b) is similar to a 401(k) account, although it is mainly for government employees and certain tax-exempt organizations. Its contribution limits are the same as those for 401(k) and 403(b) accounts.
“These are not accounts that are readily accessible to most Americans. If this type of plan is offered to employees, it may be in addition to a 401(k) or 403(b) plan,” Williams said.
He added that these accounts can allow employees to save more money in a tax-advantaged account.
Individual Retirement Account
An IRA is only available to workers with earned income.
In 2025, the contribution limit for an IRA is $7,000 for savers under 50 and $8,000 for those 50 and older. Those haven’t changed from the 2024 limits.
Like a 401(k), you’ll get a tax deduction for the money you contribute. When you withdraw funds in retirement, the money is considered taxable income.
There are some quirks. For example, if you or your spouse has a 401(k) plan through an employer, your IRA contributions may not be fully deductible. Also, you’re required to begin taking IRA distributions at age 73.
“IRA plans can benefit anyone with earned compensation to save for retirement with tax-deferred growth that is potentially tax-deductible,” Burnette said.
This includes workers without access to employer-sponsored retirement plans, as well as self-employed workers, he added. In addition, spouses with little or no income may save through a spousal IRA.
[Read: How Married Couples Can Max Out Their Retirement Accounts]
Roth IRA
The main benefits of a Roth IRA are that it’s funded with after-tax dollars, withdrawals are not considered taxable income and you don’t have to take withdrawals since you’ve already paid the tax on the money.
You need earned income to be eligible for a Roth IRA. The contribution limits are the same as with a traditional IRA.
“In general,?for?individuals that expect their income to?grow?higher over time, a Roth IRA can be a good option,” Keith Jones, a senior financial advisor at Denver wealth management firm Empower, said in an email.
“This would translate to paying taxes on the money now,?while income is lower, then taking tax-free withdrawals in the future when income could be higher,” he added.
He noted that a ?Roth IRA?may be a good?option?for younger investors,?as it may allow more time for tax-free growth.
Self-Directed IRA
A self-directed IRA is a very specific vehicle; it’s not simply an IRA you manage yourself without the help of an advisor.
Self-directed IRAs have specific custodians that differ from the typical big brokerages. They have the same contribution limits and eligibility requirements as a traditional IRA.
“A self-directed IRA is a solid option for high-net-worth individuals who want complete control over their retirement investments,” said Brian Raines, a partner at New York-based Raines & Fischer, in an email.
“Unlike a regular IRA, it lets you invest in a variety of nontraditional assets like real estate, private equity, commodities or even cryptocurrency,” Raines added.
The flexibility is a key feature, he said, but account owners need to stay current with Internal Revenue Service rules, such as prohibited transactions.
“If you’re someone who wants to take charge of your investments and avoid the typical market fluctuations, it’s a great option,” Raines said. “But for anyone new to this, there’s a learning curve, and the IRS rules can get tricky if you’re not careful.”
SIMPLE IRA
If you work at a company with 100 or fewer employees, you may be eligible for a Savings Incentive Match Plan for Employees IRA.
To participate in a SIMPLE IRA, you must have earned at least $5,000 from the company during the past two years and expect to receive at least $5,000 in the current year.
In 2025, the contribution limit for a SIMPLE IRA is $16,500 for employees under age 50. Savers 50 and older may contribute an additional $3,500, and those between the ages of 60 and 63 may contribute an additional $5,250.
“These are a step towards 401(k)s for smaller employers who can’t yet adequately fund 401(k)s and want to avoid the administrative cost and hassle,” Williams said.
“It’s a mechanism for an employer to help facilitate and fund an IRA for its employees,” he added. “Eventually, growing companies usually outgrow the SIMPLE IRA.”
[Related:How to Save for Retirement If You Work Part-Time]
SEP IRA
A Simplified Employee Pension IRA is designed for self-employed workers or small businesses with several employees.
The 2025 contribution limit for a SEP IRA is $70,000 or 25% of an employee’s eligible compensation, whichever is less. That’s an increase of $1,000 from 2024.
You won’t pay taxes on the amount contributed, but withdrawals — which are required at age 73 — are considered taxable income.
“A SEP IRA is a great option for business owners and self-employed who want to make high contributions to their retirement without dealing with a lot of admin work,” Raines said.
The higher contribution limits are attractive, but business owners must contribute the same percentage to employee accounts as to their own SEP IRAs.
“We typically suggest this type of IRA for those in partnerships or sole proprietorships with no employees,” Raines said.
Health Savings Account
A health savings account is a vehicle to save funds to help cover health costs in retirement.
To be eligible for an HSA, you must have a high-deductible health insurance plan. In 2025, an individual may contribute $4,300, and a family may contribute as much as $8,550. That’s an increase of about 3% over 2024 limits.
Savers age 55 and older can add another $1,000.
Funds in an HSA account grow tax-free and can be withdrawn tax-free if used to pay for qualifying medical expenses.
“If you have a high-deductible plan, an HSA is one of the most tax-efficient ways to save for medical expenses since contributions are tax-deductible,” said Rob Edwards, managing director and portfolio manager at Edwards Asset Management in Naples, Florida, in an email.
“If you are a high earner, an HSA can double as a sneaky retirement tool by letting you invest and grow funds for future health care costs while letting you keep more of your retirement savings,” he said.
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Retirement Accounts You Should Consider originally appeared on usnews.com
Update 02/24/25: This story was published at an earlier date and has been updated with new information.
