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How to Find the Best Retirement Plans for Your Needs

Best Retirement Plans
One of the most significant expenses people have during their working years is retirement plans, whether 401k’s or any other type of plan. Having the right kind of retirement plan can make all the difference between having enough money in your golden years and struggling to get by. Here are some tips on finding the best retirement plans for your needs, plus an overview of the different types of plans available to you.

Best Retirement Plans

A good retirement plan is built on mutual trust between you and your employer. That’s why it’s crucial to make sure your employer is offering a plan that best suits your needs. Most employers offer three types of plans: 401(k), 403(b), and traditional pension plans. Before you sign up, make sure your employer offers either a 401(k) or 403(b) with matching funds. If your employer offers a traditional pension plan — not all do — ensure it meets IRS guidelines. Once you’ve determined what type of plan your company offers, make sure to learn about its specific benefits and limits.

For example, some companies may cap their matching percentage at 3 percent; others may cover any amount over 5 percent. And while most companies match dollar-for-dollar from 1 percent to -6 percent, other companies only match contributions from 2 percent to -3 percent. Finally, don’t forget that many companies allow participants to take loans against their accounts or withdraw early without incurring penalties.

Best 401k Plans

A 401k is a retirement savings plan that lets you invest a portion of your pre-tax income into a range of mutual funds, stocks, and bonds. When you contribute to your 401k through payroll deductions, your contributions are made on a pre-tax basis—meaning you don’t pay taxes on those contributions until they’re withdrawn (withdrawals are taxed as income). Since it’s such an important financial tool, we thought it was worth comparing some of your options. We analyzed over 700 companies to come up with our top ten best 401k plans. Each plan offers valuable team member perks like matching contributions and diversified investment options. At the end of our analysis, we determined that Fidelity provided its employees with the best overall value among all 10 companies. Companies were graded based on how well they matched employees’ expectations and solid investments after taking cost into account. Another valuable feature we considered was diversity: diversity not only impacts how many types of investments you can hold in your portfolio but also reflects how committed a company is to making its employees feel supported.

Best Pension Plans

In general, pension plans offer some of your best options for retirement.
There are two main types:
A defined-benefit plan is by far more secure but also much riskier. A defined-contribution goal is less complicated, but there’s a good chance you won’t have enough saved up at retirement to live comfortably. You can learn about both types of plans—and compare them side-by-side—with our Pension Plan Comparison Tool. It provides an overview of each type (with links to specific plans). You can create comparison scenarios with different income levels, ages, and life expectancies to see which will work best in any given situation. For example, in most cases, matching 401(k) contributions will make it difficult or impossible to save up enough in a pension plan for retirement (although there are exceptions). Still, there may be cases where they complement each other well. Or, if you want one that matches employee contributions up to 6% or 7%, then consider pairing it with another employer that matches just 3%. You get all sorts of combinations with our tool.

Best Individual Savings Account (ISA)

An ISA is a special type of savings account that gives savers tax breaks on money saved. These accounts are available in most countries, though rules may vary depending on location. In many places, ISAs are also called Roth IRAs or Roth 401(k) s. Though investments grow tax-free inside an ISA, any funds withdrawn during retirement will be taxed as income. However, these withdrawals will not impact your Social Security eligibility since they won’t be part of your standard income level during retirement. You can withdraw contributions at any time without penalty—though it’s worth noting that some plans have restrictions if you want to tap into earnings before reaching 59 1⁄2 years old. It’s important to note that Individual Savings Accounts (ISAs) aren’t insurance policies.

About Me

Don Larson, CFP® is the owner and founder of Larson Wealth Management. Don started in the investment advisory industry in 1999 after he graduated from Arizona State University with a Bachelor of Science degree in Business Finance.

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