Retirement Investing: 2 Alternative Options to a 401(k)

Savage, Combs and Villoch, PLLC
28
Jul

retirement investingIf you’re smart, you are planning for your financial future. Retirement investing is one of the surest methods for building a nest-egg.

Most likely, you’re familiar with the concept of retirement investing. Typically, you can direct funds from your personal income into tax-sheltered or tax-deferred accounts. This is known as a 401(k).

However, there are alternative investment options to a 401(k) available. You can also invest in a 403(b) or a 157(b). These alternative options allow you to invest in certain investment options. It’s important to remember, though, that not every employer offers these plans.

In this post we’ll cover retirement investing options that can be a great alternative to a 401(k). We’ll give you a breakdown of each one, how it works and who is eligible.

403(b)

This investment plan option is typically available to employees of public education institutions, non-profits and religious organizations. It is what’s known as a tax-sheltered annuity (TSA) plan.

Think of it as the non-profit version of a 401(k). With a 403(b), you can defer parts of your earnings to the designated annuity plan. Your employer may also offer options in which they contribute to it as well.

457(b)

This option is typically available to employees of state and local government agencies and non-profits. This type of plan is known as a deferred compensation plan.

It allows you to put-off paying taxes on contributions to retirement savings until later years. Earnings made on retirement savings are also deferred.

Rules and Limits

With both retirement investing plans, there are rules and limits as to who is eligible, what plans are available to you, and how much can be contributed.

  • Currently, both plans have contribution limits set at $18,000. However, this is subject to change year-to-year.
  • Typically, employers select which plans you can choose from. They are usually a limited offering.

What You Need to Know about Retirement Investing

You need to choose a vendor and plan that suits your retirement investing goals. It’s also important to note that just because a plan is offered through your employer, it does not mean that the vendor has been vetted or endorsed by your employer.

Before selecting any plan, make sure you research the vendors’ background and experience.

Resources

If you want to learn more about these retirement investing alternatives, read the SEC bulletin. If you want to learn more about protecting your investments, check out our blog for even more investing tips.