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Types of retirement plans: A summary

An overview of employer-sponsored and individual retirement plans.

Guardian Life Insurance of America
Written by

Reviewed by

Older couple checking on their claims online.

It’s never too early to think about retirement income planning and start saving: Guardian’s 2025 Workplace Benefits Study has found that two top stressors for American workers are having a source of guaranteed income in retirement (46%), and having retirement savings last as long as needed in retirement (44%).1 And, nearly 4 in 10 adults have regrets about how they’ve prepared for retirement so far.1

The good news is, there are a lot of different retirement savings plans and account options that can help build up your nest egg, and your employment status will help determine what's available to you. Some retirement accounts — called "employer-sponsored plans" are only available if you're employed by a business, tax-exempt or non-profit entity, or the government. Others — known as "Individual Retirement Accounts" — aren't dependent on job status. Both categories of plans have significant tax advantages compared to a regular savings or brokerage accounts, and are specifically designed for long-term retirement savings. Here's a brief overview of the most popular types of plans.

Employer-sponsored plans

An employer-sponsored retirement savings plan is one of the most valuable benefits you can have as an employee. While participation isn't always mandatory, almost all financial professionals would advise you to do so if at all possible. Why? Employer contributions, including matching and discretionary contributions, are a key benefit of many employer-sponsored plans, and not taking advantage of them is like leaving money on the table. They’re also easy to use, because automatic payroll deductions are the primary way to contribute to these plans. Employer-sponsored plans usually have higher contribution limits than IRAs (see below), which can help you to accumulate more money over the same period. Plus, older employees can often make catch up contributions, allowing them to contribute additional amounts beyond the standard limits. But it's important to understand that different kinds of employers can offer different kinds of plans, and each has its own rules for how contributions are made and when they are taxed. Common employer-sponsored plans include:

Plan

401(k)

403(b)

457(b)

Thrift savings plans (TSP)

Type of employer

Available to non-governmental employers including tax-exempt companies

Tax-exempt organizations

State and local governments, and some tax-exempt organizations

Federal employees and some military members

How contributions are made

Employee selects pre-tax contributions for immediate tax savings or after-tax contributions

Contributions are made via payroll deductions on a pre-tax basis or with pre-tax money, with some plans allowing after-tax contributions (Roth 403(b))

Pre-tax contributions via payroll deductions

Employee selects pre-tax contributions to a traditional TSP and/or after-tax contributions to a Roth TSP via payroll deductions

How Funds grow

Investment earnings grow tax-deferred until retirement

Investment earnings grow tax-deferred until retirement; Roth options also allow tax free withdrawals

Investment earnings grow tax-deferred until retirement; Roth options may allow tax-free withdrawals in retirement

NA

Other Features

Many employers match your contribution; retirement withdrawals from pre-tax contributions and earnings on after-tax contributions are subject to ordinary income tax

Employer contributions may be available; withdrawals from traditional (non-Roth) accounts are taxed as ordinary income; Roth plan withdrawals are not taxed; catch up contributions available.

Retirement withdrawals are subject to income tax; no early-withdrawal penalties if an employee separates before age 59 ½; capital gains are not taxed until withdrawal; catch up contributions available.

Investment earnings grow on a tax-deferred basis for traditional TSP; Roth TSP allows tax-free retirement withdrawals

How funds are invested

Employee chooses from a variety of investments, including CDs, bonds, stocks, and mutual funds but may vary by plan

Employee choices usually include annuities and mutual funds, but investment options vary by plan

Employee chooses from a variety of investments, including CDs, bonds, stocks, mutual funds, annuities; investment options vary by plan

Employer contributions may be available; retirement withdrawals from traditional accounts are taxed as income; capital gains are not taxed until withdrawal; catch up contributions available.

What about traditional pension plans?

Also known as a "defined benefit plan," these are employer-funded plans that guarantee a specific monthly income during retirement, typically based on years of service and salary history. Some defined benefit plans are traditional pension plans, and others are cash balance plans, which combine features of pensions and defined contribution plans. These have become much less common in recent years as many employers have transitioned to employee-funded "defined contribution plan" alternatives, such as 401(k) plans.

Individual Retirement Accounts (IRAs)

An Individual Retirement Account — or IRA — is a tax-advantaged retirement savings account funded and managed by an individual — you — without any employer involvement. They are typically used by self-employed people and by those wishing to supplement their employer-sponsored plans. To contribute to most IRAs, you must have earned income, though a spousal IRA allows a worker’s spouse to contribute without earned income.

There are two main types of IRAs, and the primary difference has to do with when you pay income taxes. Contributions made to traditional IRAs are typically made with pre-tax dollars – which reduces taxable income for the year. Investment growth is tax-deferred, but taxes are paid when you withdraw funds in retirement. On the other hand, a Roth IRA is funded with after-tax dollars (so you don't get a tax deduction when you contribute), but investment growth is tax-deferred, and qualified withdrawals are tax-free during retirement. Other features, tax benefits, and types of IRAs include:

Plan

Traditional IRA

Roth IRA

Spousal IRA

Rollover IRA

SEP IRA(Simplified Employee Pension)

Best suited for

Those who will be in a lower tax bracket after retiring

Those who will be in a higher tax bracket after retiring

A non-working spouse or spouse with limited income

Those who want to transfer funds from an employer-sponsored plan

Self-employed individuals or small business owners

How contributions are made

Pre-tax contributions for immediate tax savings (tax deductibility subject to income limits)

After-tax contributions, but qualified withdrawals are not taxed

Can be pre-tax (Traditional IRA) or after-tax (Roth IRA); working spouse can contribute for non-working spouse (even if the spouse has no earned income)

For those changing jobs or retiring; funds from the original IRA are not taxed as they roll over into the new IRA

Have higher contribution limits than Traditional IRAs; contributions are tax deductible, subject to certain limits

How funds grow

Investment earnings grow tax-deferred until retirement

Investment earnings grow tax-deferred until retirement

Investment earnings grow tax-deferred until retirement

Investment earnings grow tax-deferred until retirement

Investment earnings grow tax-deferred until retirement

Other features

Retirement withdrawals are subject to tax; penalty-free early withdrawals are allowed for certain purposes

Qualified retirement withdrawals are not taxed; early withdrawals that are not qualified withdrawals may be subject to a penalty3

Pre-tax (Traditional) contributions get immediate tax savings; after-tax (Roth) contributions get tax-free qualified withdrawals in retirement

Can be used to consolidate retirement savings from different employers

Business owners can contribute on behalf of employees

How funds are invested

Investment choices include CDs, bonds, stocks, mutual funds, and more

Investment choices include CDs, bonds, stocks, mutual funds, and more

Investments include CDs, bonds, stocks, mutual funds, and more

Investment choices include CDs, bonds, stocks, mutual funds, and more

Investment choices include CDs, bonds, stocks, mutual funds, and more

Other ways to save for retirement

Employer-sponsored retirement plans and IRAs are among today’s most popular retirement savings vehicles, but they are not the only options. Other popular choices include annuities, which can provide guaranteed income in retirement, and cash-value life insurance policies.

Annuities

These are financial products that convert a sum of money into a steady stream of income during retirement. While annuities can provide lifetime income that helps ensure you don't outlive your savings, they can also be complex investments.

  • Investments grow tax-deferred, allowing money to grow faster than in taxable accounts.

  • Options include immediate annuities that begin paying out immediately after purchase or deferred annuities that allow the investment to grow over time before starting income payments.

  • Annuities can be structured as fixed, where investment growth is based on a set rate of interest, or variable, where investment growth (and later income payments) fluctuates based on the performance of underlying market investments.

  • Some annuities include features like inflation protection, which adjusts the payments to maintain purchasing power.

Cash-value life insurance policies

While the primary purpose of a life insurance policy is to provide a death benefit payout to help protect beneficiaries’ financial well-being, whole life insurance and universal life insurance policies can also be used as a retirement savings vehicle. In addition to protecting your loved ones in the event of an untimely death, these policies provide a tax-advantaged way to accumulate funds that can be used before or after retirement. As children become self-sufficient adults, many people use their cash-value life insurance to supplement other retirement accounts. (Please note that term life insurance does not accumulate cash value and has no benefit in terms of retirement savings.)

  • A portion of every premium payment goes into a cash account which grows over time and can be accessed while the policyholder is still living.

  • The cash value component of the policy grows tax-deferred, so your money can grow faster.

  • Policyholders can borrow against the accumulated cash value without triggering taxable events, providing a source of tax-free income in retirement.

  • Some policies may allow you to convert the cash value into an annuity, providing a steady stream of income during retirement.

  • Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

Guardian can help

There are many ways to save for retirement and help safeguard your future. If you need help with what to do, consider getting guidance from a financial professional. If you don't currently work with one, Guardian can help. A Guardian Financial Professional will listen to your needs, help define your goals, and work with you to better understand the retirement planning process and make the right decisions. Here's how to find someone near you:

Need some help?

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Need more retirement planning information?

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  • What will your retirement look like? Try our retirement planner.

  • Worried about outliving your savings? Ways to help make your money last.

  • Learn more about retirement income planning

Frequently asked questions about retirement savings plans

The main types of retirement plans include employer-sponsored 401(k) plans, 403(b) plans, individual retirement accounts (IRAs) such as Traditional and Roth IRAs, simplified employee pension (SEP) IRAs for self-employed individuals, SIMPLE IRAs for small businesses, defined benefit plans, and profit-sharing plans. 401(k) and 403(b) plans allow employees to contribute a portion of their pre-tax salary, while IRAs offer personal retirement accounts with tax advantages. SEP IRAs and SIMPLE IRAs are for self-employed individuals and small businesses. Defined benefit plans provide a fixed benefit based on factors like salary and service, and profit-sharing plans involve employers contributing a portion of company profits.

401(k) plans are offered by many employers, both large and small, and allow employees to contribute a portion of their pre-tax salary toward their retirement savings. The popularity of 401(k) plans can be attributed to their convenience, as contributions are deducted directly from the employee's paycheck and the potential for employer matching contributions, which can help accelerate retirement savings. The amount individuals can contribute to their 401(k) plans in 2025 has increased to $23,500, up from $23,000 for 2024. Additionally, 401(k) plans may offer a wide range of investment options, allowing individuals to customize their portfolios based on their risk tolerance and financial goals.

This material is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, The Guardian Insurance & Annuity Company, Inc. and their affiliates and subsidiaries are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation.

The information provided herein is not written or intended as investment, tax or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. Current tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the particular set of facts and circumstances. Entities or persons distributing this information are not authorized to give tax or legal advice. Individuals are encouraged to seek specific advice from their personal tax or legal counsel.

1 Mind, Body, and Wallet® 2025, The Guardian Life Insurance Company of America, 2025.

2 Publication 590-B (2024), Distributions from Individual Retirement Arrangements (IRAs), Internal Revenue Service, March 20, 2025.

3 401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000, Internal Revenue Service, November 1, 2024.