Best retirement savings accounts for beginners

When starting to save for retirement, it’s crucial to pick the right savings account based on your financial goals, tax preferences, and risk tolerance. Here are the top options for beginners:

1. 401(k) (Employer-Sponsored)

• Why It’s Great: A 401(k) is a popular option if your employer offers a match. It’s essentially “free money” for your retirement.

• Benefits:

  • Contributions are tax-deferred.

  • High contribution limits.

  • Employer match (if offered).

• Best for: Employees with access to an employer 401(k) plan.

2. Roth IRA

• Why It’s Great: Roth IRAs offer tax-free withdrawals in retirement, making them a great option if you expect to be in a higher tax bracket when you retire.

• Benefits:

  • Tax-free growth and withdrawals.

  • No required minimum distributions (RMDs).

• Best for: Beginners who expect their income to rise or who want flexibility.

3. Traditional IRA

• Why It’s Great: Contributions to a Traditional IRA are tax-deductible, reducing your taxable income in the year you contribute.

• Benefits:

  • Tax-deferred growth.

  • Broad investment options.

• Best for: Those looking for a tax deduction now and tax-deferred growth.

4. Roth 401(k)

• Why It’s Great: Combining the higher contribution limits of a 401(k) with the tax-free growth of a Roth IRA, the Roth 401(k) is ideal for tax-free retirement income.

• Benefits:

  • Tax-free withdrawals in retirement.

  • Employer contributions (if offered).

• Best for: Those seeking tax-free retirement income and higher contribution limits.

5. SEP IRA (Simplified Employee Pension)

• Why It’s Great: Ideal for self-employed individuals or small business owners, the SEP IRA allows larger contributions compared to a Traditional or Roth IRA.

• Benefits:

  • Higher contribution limits.

  • Flexible contributions.

• Best for: Self-employed individuals or business owners.

6. Health Savings Account (HSA)

• Why It’s Great: An HSA offers tax-free growth and can be used for medical expenses. After age 65, you can use it for any expense without penalties.

• Benefits:

  • Triple tax benefit: tax-free contributions, growth, and withdrawals for medical expenses.

  • Can be used for non-medical expenses after 65.

• Best for: Those looking to save for both medical expenses and retirement.