There are many ways to save money for retirement, but the most common ways are 401(k), 403(b), Individual Retirement Account (IRA), Roth IRA, and a Health Spending Account (HAS).
Here are the details for each retirement savings account:
• Depending on the type of company for which you work, your employer may either offer a 401(k) or a 403(b) plan. You may be automatically enrolled in this type of plan and have employer matching where your contributions are matched by your employer, depending on your employer’s policies.
• The traditional Individual Retirement Account (IRA) is a bank account that allows you to save money for retirement in a tax-advantaged way. Also, age and the amount of contributions you are already making to retirement accounts at work affect the tax advantages of your IRA account.
• The Roth IRA offers tax advantages for which your IRA qualifies depends on the type of IRA account you open. With a Roth IRA, you make contributions to the retirement account post-tax. The money then grows tax-free over time. This means that when you withdraw the money during retirement, you don’t pay any taxes on it, but you cannot deduct contribution from income as made.
• A Health Spending Account (HSA). An HSA account allows you to save certain kinds of expenses, such as doctor visits, prescription medications, dental and eye care and related costs. Then, these expenses become tax deductible when you are preparing your annual tax return.
Remember, it’s important to begin contributing money toward your retirement as early as you can to ensure you have enough money saved up by retirement age. Whether you decide to save money via your employer’s 401(k) or via a Roth IRA, just make sure you understand the savings program in detail.