Saving for retirement requires more than simply saving money. Therefore, understanding the best investment strategies for retirement is essential for anyone who wants a stable and worry-free financial future.
Currently, there are different retirement plan options available, such as traditional IRAs, Roth IRAs, 401(k), 403(b) plans, and alternatives specific to self-employed workers and small businesses, such as the SEP IRA and SIMPLE IRA.
We will explain everything about each of the options in detail, making it easier to start investing in one of the best investment strategies for retirement.
1. 403(b) Plans
The 403(b) plan works similarly to the well-known 401(k) plan, but it is aimed at a specific audience.
At first, it is offered to public schools, non-profit hospitals, religious organizations, and charities. Other words, it is an alternative aimed mainly at public sector and third sector workers.
In fact, in this type of plan, the employee contributes part of the salary before taxation. In this way, the amount deposited is not considered taxable income at the time of contribution.
When retiring, withdrawals are treated as common income and, therefore, are taxed.
If the participant decides to withdraw the money before the age of 59 1/2, there are additional taxes and possibly fines. Except for specific exceptions provided for by law.
In addition, for those who prefer to pay taxes now and avoid surprises in the future, there is the Roth 403(b) version. In this case, contributions are made with money already taxed.
Like the 401(k), the 403(b) plan can be an interesting tool for long-term savings. Especially for professionals who work in essential sectors and who have simplified and affordable investment options.
2. IRA Plans (Best Investment Strategies for Retirement)
Unlike traditional 401(k) plans, which require annual nondiscrimination testing to ensure that highly compensated employees are not contributing disproportionately.
In this model, the employer has two contribution options:
- Equaling up to 3% of the employee’s salary (contribution match).
- Contribute 2% of the salary of all eligible employees, even if they don’t make any contributions on their own.
This makes SIMPLE IRA an interesting option for small businesses that want to offer a retirement plan with less complexity and regulatory obligations.
Let’s look at the top IRA plans available on the market, read on.
Traditional IRA
The Traditional IRA is a tax-advantaged retirement plan that allows you to reduce your tax burden while saving for the future.
If you have a job, you can contribute pre-tax amounts, deducting those contributions from your income tax and reducing your taxable income in the same year.
You grow these amounts with tax deferral, paying taxes only when you make a withdrawal.
However, withdrawals made before the age of 59 and a half will cause you to pay taxes and an additional 10% fine, except in specific exceptions provided for by legislation.
Roth IRA
Roth IRA is a modern alternative to the traditional IRA, with tax advantages for those who think in the long term.
Unlike the traditional model, contributions to the Roth IRA are made with money already taxed. Therefore, it does not receive the deduction in income tax at the time of contribution.
The advantage lies in the future, as qualifying withdrawals are completely tax-free. Both on contributions and on accumulated income.
IRA marital (Best Investment Strategies for Retirement)
Usually, those who have income can contribute to an IRA. However, the IRA does make contributions even if it does not have a source of income of its own.
For this, the income of the working spouse needs to be enough to cover all contributions made to the couple’s IRAs.
You can organize this type of account as either a traditional IRA, gaining immediate tax benefits, or as a Roth IRA, enjoying tax-free withdrawals in the future.
SEP IRA
Small business owners, employers, and self-employed workers can use the SEP IRA (Simplified Employee Pension) as a retirement plan designed specifically for them.
Only the employer makes contributions to this plan, depositing directly into individual SEP IRA accounts for each employee.
The company can make optional and flexible contributions, adjusting them at its discretion—similar to how a profit-sharing plan works.
By the way, for 2025, the contribution limit is 25% of the employee’s compensation or US$ 70,000, whichever is lower.
In the case of self-employed, the calculation of the maximum amount allowed follows specific rules and can be a little more complex.
3. 401(k) Plans (Best investment strategies for retirement)
Defined contribution plans, such as 401(k), have become the most common among workers in the United States since the 1980s.
They have largely replaced the old pension plans, guaranteeing fixed payments in retirement.
You deposit a fixed amount, but your retirement income depends on how your investments perform. In other words, the risk and growth potential fall more on the participant.
For 2025, the annual contribution limit is $23,500. Those who are 50 years old or older can make a recovery contribution of up to US$ 7,500.
Workers aged 60 to 63 will be able to contribute up to an additional $11,250. Thus helping to reinforce savings in the final years of his career.
Many plans also offer the Roth 401(k) version.
In this case, the worker contributes with money already taxed. You enjoy tax-free withdrawals in retirement, as long as you follow certain rules.
You can easily find all these investments through brokers and banks. For example, Charles Schwab, Fidelity, IRS.gov, among others.
Conclusion
Understanding the best investment strategies for retirement is important to ensure peace of mind and financial security in the future.
As we have seen, there are several options for retirement plans, each with its own characteristics and benefits that adapt to different profiles and stages of life.
Regardless of the plan chosen, the most important thing is to start investing as soon as possible.
By aligning your investor profile, ability to contribute, and retirement goals. Thus, you will be able to harness the power of compound interest and build solid wealth over time.
Thus, we recommend that you evaluate your options, seek professional guidance if necessary and start now on your path with the best investment strategies for retirement.
In addition, a good way to organize your finances in the right way is to invest in the stock market and fixed income. Therefore, we recommend that you follow the how to start investing money.