Retirement can last a lot longer than you think. According to Money Guide, a 65-year-old married woman today has a 50% chance of living to age 90. That means it’s entirely possible your post-career phase lasts 25 years or more. Your life expectancy may be a lot longer than you anticipate.

That’s great news if you’re well-prepared. But, making your money last 25 years or more can be incredibly stressful, especially if your retirement planning has not been a priority. Fortunately, there are many ways to save for a retirement that could last for many years.

Since planning is the key to success, here are eight retirement accounts to consider in the new year:

First, learn about your 401(k) plan at work. In 2022, you can contribute up to $20,500 if you are under age 50 and $27,000 if you will be age 50 or older during the year ($19,500 and $26,000, respectively, for 2021). Even if your company doesn’t offer a match, consider saving at least 6% of your salary to start. Look into features that help you automatically increase your contribution rate over time.

Open and save to an individual retirement arrangement (IRA). If you don’t have access to a workplace plan or if you want to supplement your savings, consider an IRA. In 2021 and 2022, you can contribute up to $6,000 ($7,000 if you are age 50 or older) to an IRA. And you may receive a valuable tax deduction.

Consider a Roth option. While a Roth IRA doesn’t provide you an immediate tax benefit, it can provide tax-free income in retirement. It also can add a different tax treatment alongside any traditional retirement account assets and taxable investments. You can make Roth contributions in two ways:

• Through a Roth IRA. However, the ability to contribute is phased out if your income exceeds certain levels.

• Through a 401(k) or 403(b) plan. You might be able to direct contributions to a designated Roth account if your workplace plan provides this option. If so, contributions are not limited by your income level.

See if your spouse is eligible for a spousal IRA. If your spouse doesn’t have their own earned income (or very little), they can open and fund their own traditional or Roth IRA based upon your compensation.

If you are self-employed, consider saving in a Simplified Employee Pension plan IRA (SEP-IRA). This type of tax-deductible IRA is easy to set up and maintain, and it has very generous contribution limits. In 2022, you can contribute the lesser of 25% of compensation or $61,000 ($58,000 for 2021). A SEP-IRA can also work for people with a side job.

Employ a Rollover IRA. Cashing out of your employer plan may, when changing jobs, for example, usually means paying taxes on the value of the plan, plus a penalty. However, there are three good options to avoid that scenario to keep your money tax-deferred when you change jobs. You can leave it with your previous employer (if permitted by that plan), roll it into your new 401(k) plan (if permitted), or roll it into an IRA. If you wish to consolidate all your 401(k) balances in a single account, a Rollover IRA may be a good option.

When deciding between an employer-sponsored plan and an IRA, there may be important differences to consider—such as the range of investment options, fees and expenses, availability of services, and distribution rules (including differences in applicable taxes and penalties). Depending on your employer-sponsored plan’s investment options, in some cases, the investment management fees associated with that plan’s investment options may be lower than similar investment options offered outside the plan.

Contribute to your health savings account (HSA). An HSA offers triple tax advantages. Your contributions are tax-deductible, your money can grow tax-deferred, and when you withdraw the money (for qualified health care expenses), you do so tax-free. If you participate in a high deductible health plan (HDHP), you can contribute $3,650 for individual coverage and $7,300 for family coverage in 2022 ($3,600 and $7,200, respectively, in 2021). While HSAs can cover immediate health care costs, they are also a way to invest tax-free for health expenses in retirement.

Invest in a taxable nonretirement account. While all of the types of accounts listed above provide significant tax advantages, you may want savings that are more readily accessible. In addition to cash reserves for possible emergencies, you could supplement your retirement savings with investments for the longer term. A combination of taxable, tax-deferred, and tax-free sources of savings can provide a foundation for retirement success.

Financial security in retirement doesn’t just happen. It takes planning and commitment (and money). Personalized planning based upon your specific life goals, tax, and financial situation should be the foundation for a successful retirement plan.

Visit the U.S. Department of Labor for additional resources, including Savings Fitness: A Guide To Your Money and Your Financial Future, Taking The Mystery Out of Retirement Planning, and Retirement Toolkit.

This article is provided for general and educational purposes only and is not intended to provide legal, tax, or investment advice. The content contained herein does not provide recommendations concerning investments, investment strategies, or account types; it is not individualized to the needs of any specific investor and not intended to suggest any particular investment action is appropriate for you, nor is it intended to serve as the primary basis for investment decision-making. This website does not provide legal or tax advice. Any tax-related discussion contained in this website, including any attachments or links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel, professional tax advisor, or independent fee-based registered investment advisor regarding any legal, tax, or investment issues raised in this website.

Source:  U.S. Department of Labor