Choosing the best retirement plan starts with matching the right account to your financial situation, income, tax goals, and retirement timeline. If you're in your mid-50s or early 60s and unsure whether you've saved enough, you're not alone. At this stage, you also have a better understanding of your savings, expected retirement income, and future expenses. That insight can help you choose the retirement plan that best fits your needs.
If you're unsure which retirement plan best fits your financial situation, comparing your options with the right guidance can help you make a more informed decision. Take our free quiz to get matched with up to three fiduciary advisors. Then, compare their experience, services, and fees to find the right fit for your retirement goals.
Why "Best" Depends on Your Situation
The best retirement plan depends on your overall circumstances, income, employment status, tax considerations, and retirement timeline. A plan that works well for one person may not be the right choice for someone with different financial priorities or retirement goals.
For example, a high earner with a workplace retirement plan faces different options than someone who is self-employed or opening a retirement account for the first time. Because of that, choosing the right combination of accounts is usually more effective than relying on a single option. Many people benefit from contributing in a logical order. This strategy typically starts with employer benefits before moving to additional tax-advantaged accounts that fit their financial needs.
Here's how each retirement plan works:
Workplace Plans: 401(k) and 403(b)
For most employees, a 401(k) or 403(b) is the foundation of a retirement savings strategy. A 401(k) is commonly offered by private employers, while a 403(b) is available to many employees of schools, hospitals, and nonprofit organizations. In either plan, you contribute directly from your paycheck on a pre-tax or after-tax basis. Over time, these contributions can grow within the account, helping you build savings for retirement.
The Employer Match Is Free Money
If your employer offers a matching contribution, try to take full advantage of it whenever possible. The match adds extra money to your retirement account based on how much you contribute. This can help increase your savings without relying entirely on your own contributions.
For that reason, consider contributing at least enough to receive the full employer match. Otherwise, you could miss out on part of your total compensation. If you're approaching retirement, this additional amount can provide an extra boost to your long-term savings.
Another advantage is that workplace plans generally allow higher contribution limits than IRAs. That extra contribution room can be especially valuable during your final working years if you're trying to increase your retirement savings. For more information, our retirement resources cover related retirement planning topics in more detail.
Traditional IRA
A Traditional IRA is a retirement account you open independently rather than through an employer. Depending on your eligibility, your contributions may qualify for a current tax deduction. The availability of that deduction depends on your income and whether you or your spouse participates in an employer-sponsored retirement plan. Meanwhile, your investments grow tax-deferred. You'll generally pay ordinary income tax when you withdraw the money in retirement.
In addition, a Traditional IRA can provide another way to build retirement savings outside an employer-sponsored plan. It's also a common destination for rolling over a former 401(k) after changing jobs. That flexibility makes it a practical option for keeping your retirement savings in one account.
Roth IRA
A Roth IRA follows a different tax approach to retirement savings. You contribute money that has already been taxed, so there's no tax deduction upfront. However, qualified withdrawals are generally tax-free in retirement. That tax treatment also applies to your investment growth.
Beyond the tax benefits, it can provide more flexibility when managing retirement income. Qualified withdrawals generally don't increase your taxable income, which may help with Social Security taxation and Medicare premiums. At the same time, not everyone can make direct Roth IRA contributions because income limits apply. A fiduciary advisor can help evaluate which retirement savings options best fit your needs.
The Roth vs. Traditional Tradeoff: Tax Now or Tax Later
The main difference between Traditional and Roth retirement accounts is when you pay taxes. In general, Traditional accounts can provide tax benefits when you contribute, while Roth accounts generally provide tax-free qualified withdrawals in retirement. The right choice depends on your current tax situation and what you expect in the years ahead.
Here are the key differences between Traditional and Roth retirement accounts:
- Traditional accounts (Traditional 401(k) and Traditional IRA): Depending on the account and your eligibility, you may qualify for a tax deduction when you contribute. Your investments grow tax-deferred, and you'll generally pay ordinary income tax on withdrawals in retirement. This approach may suit people who expect to be in a lower tax bracket later.
- Roth accounts (Roth IRA and Roth 401(k)): Contributions are made with after-tax money, so there's no tax deduction upfront. Qualified withdrawals, including investment growth, are generally tax-free in retirement. This approach may suit people who expect to be in the same or a higher tax bracket later.
Rather than choosing one approach exclusively, many people contribute to both Traditional and Roth accounts over time. That strategy can provide more flexibility when managing taxable income throughout retirement. If you're approaching retirement, you may also have a better understanding of your future income and tax situation, making it easier to evaluate which approach best fits your needs. You can explore additional retirement tax planning guidance in our tax topics.
Self-Employed Options: SEP-IRA and Solo 401(k)
Self-employed workers have access to retirement plans designed specifically for business income. Depending on how you earn and how much you want to contribute, these accounts can provide higher contribution limits and valuable tax advantages. The best option depends on your business structure and retirement goals.
Here are the primary retirement plans available to self-employed individuals:
SEP-IRA
A SEP-IRA is designed for self-employed individuals and small business owners who want a simple retirement plan. It generally allows contributions based on a percentage of your self-employment income, making it possible to save more than with a standard IRA. The account is relatively easy to manage and requires less administrative work than many other retirement plans. Contributions are typically tax-deductible, while your investments grow tax-deferred.
Solo 401(k)
A Solo 401(k) is available to business owners with no employees other than a spouse. Because you can contribute as both the employer and the employee, it may allow you to save more for retirement than many other self-employed plans. Some Solo 401(k) plans also include a Roth option, giving you more flexibility in how your retirement savings are taxed. That added flexibility can be especially valuable if you're trying to maximize contributions before retirement.
Choosing between these accounts depends on your income, retirement savings goals, and the features that matter most to you. To make that decision, a fiduciary advisor can help evaluate how each option fits your financial situation and compare the available choices before you decide.
The HSA: A "Stealth" Retirement Account
A Health Savings Account (HSA) can serve as more than a way to cover current medical expenses. According to the IRS, the 2026 HSA contribution limits are $4,400 for self-only coverage and $8,750 for family coverage. If you're enrolled in an eligible high-deductible health plan, an HSA can also support long-term retirement planning through three distinct tax advantages.
Here are the three tax benefits an HSA can provide:
- Contributions may be tax-deductible or made pre-tax through payroll.
- Money in the account can grow tax-free.
- Withdrawals for qualified medical expenses are tax-free.
Together, these benefits can make an HSA particularly useful for future health care expenses. If you pay current medical costs out of pocket, you can leave eligible funds invested for later use. These savings may become especially valuable in retirement, when health care costs can take up a larger share of your budget. After age 65, withdrawals for non-medical purposes are generally subject to ordinary income tax rather than the additional HSA tax penalty.
As part of long-term retirement planning, an HSA can add another source of tax-advantaged savings if you're eligible to contribute. This can provide more flexibility when coordinating health care costs with other retirement needs.
Catch-Up Contributions: A Head Start for the 50+ Crowd
If you're 50 or older, catch-up contributions allow you to save beyond the standard annual limits in certain retirement accounts. This additional contribution room can be especially useful as retirement gets closer and you have fewer working years left to build your savings.
At this stage, you may also be earning more than earlier in your career while managing fewer competing expenses. That combination can make it easier to direct additional income toward retirement. With more cash flow available, catch-up contributions may help you make better use of your remaining working years.
If your budget allows, prioritize your full employer match before directing additional savings elsewhere. You may also fund an HSA if you're eligible and then use available catch-up contributions for qualifying retirement accounts. For 2026, the catch-up contribution limit for most 401(k) and 403(b) plans is $8,000, while eligible participants ages 60 through 63 can contribute up to $11,250. For personalized guidance, a fiduciary advisor can help evaluate how these contributions fit into your retirement plan.
A Decision Framework by Situation
The order in which you prioritize retirement accounts depends on your employment status, available benefits, income, and proximity to retirement. Rather than treating every account equally, focus on the options that offer the most practical value for your circumstances.
Here are four common situations that can help you organize your retirement savings priorities:
Employed With an Employer Match
Start by contributing enough to your 401(k) or 403(b) to receive the full employer match. After securing the full match, consider contributing to an HSA if you're eligible. From there, an IRA may provide another savings option based on your tax situation and financial needs. Any remaining savings can then be used to increase contributions to your employer-sponsored plan.
Self-Employed
For self-employed workers, the first step is usually comparing a SEP-IRA with a Solo 401(k) based on business income and preferred plan features. An HSA can also fit into the strategy if you meet the eligibility requirements. Depending on your income, you may also explore a Roth IRA or use available catch-up contributions if you're 50 or older.
High Earners
Higher income can make tax considerations more important when deciding where to contribute. For this reason, maximizing contributions to an employer-sponsored or self-employed plan may provide a useful starting point, followed by an HSA if you're eligible. If you still have additional savings to invest, keep in mind that direct Roth IRA contributions are subject to income limits, so check the current IRS requirements before contributing. You can also evaluate other available accounts based on their contribution rules and your long-term savings priorities.
Approaching Retirement
As retirement gets closer, focus on making the most of the contribution opportunities still available to you. That may include using catch-up contributions where eligible and reviewing how your Traditional and Roth balances could affect future taxes. Your account choices should also align with planned withdrawals, Social Security timing, and expected health care expenses.
Being Close to Retirement Makes Planning More Precise, Not Too Late
Approaching retirement doesn't mean you're too late to make important planning decisions. A shorter planning horizon can help you focus on the financial choices that require attention before you leave the workforce.
At this point, you can estimate future income needs, review potential tax considerations, and coordinate your savings strategy with Social Security timing. You can also identify areas where adjustments could further strengthen your retirement strategy before your final working years end.
These steps can help you align your accounts and contribution strategy with your retirement priorities. Our investing guides can also help you understand how retirement savings may be invested once they are contributed.
Consider a hypothetical 58-year-old employee who plans to retire within the next several years. Reviewing expected income, planned withdrawals, and current savings could help identify adjustments before retirement begins. The example is hypothetical only and does not represent a specific person or guarantee any financial outcome.
Confused About Which Retirement Plan to Choose? Take Our Free Advisor Quiz to Get Matched With an Advisor
Comparing retirement plans can be difficult when several options could fit your needs. Without a clear strategy, you may choose an account that works today but creates tax challenges or limits your flexibility later. With retirement on the Edge, these decisions can affect how efficiently you manage your savings and prepare for the years ahead.
If you need help making sense of your options, take our free quiz to get matched with up to three fiduciary advisors. From there, you can compare their experience, services, and fees before choosing an advisor who fits your needs. The right professional can help you review your retirement plan options and develop a strategy based on your priorities and long-term goals.
FAQs
Can I Contribute to a 401(k) and an IRA at the Same Time?
Yes. You can contribute to a 401(k) and an IRA during the same year. However, income limits and workplace plan coverage can affect certain IRA tax benefits. Each account also follows its own contribution rules.
Which Retirement Accounts Require Minimum Distributions?
Traditional IRAs and many employer-sponsored plans generally require RMDs, while Roth IRAs do not require them during the original owner's lifetime. Beneficiaries may also face separate requirements.
What Happens If I Withdraw Retirement Money Before Age 59½?
Early withdrawals are possible, but taxes and an additional 10% tax may apply. The IRS provides several exceptions, depending on the account and reason for the withdrawal.
Can I Borrow Money From My 401(k)?
Yes, if your plan allows loans. A 401(k) loan generally must be repaid according to the plan's repayment schedule. Keep in mind that employers are not required to offer this feature. Check your plan documents before considering this option.
What Happens to My Retirement Account After I Die?
A beneficiary can generally receive your retirement account after your death. However, distribution requirements can vary based on the account type and the beneficiary's relationship to you. Spouses may also have options that are not available to other beneficiaries.
