3 Retirement Savings Plans We Should All Be Thankful For

(Maurie Backman)

Thanksgiving is a time to express gratitude — for great food, good health, and the important people in our lives. But this Thanksgiving, it certainly wouldn’t hurt to take a little time to acknowledge the many terrific financial products that make saving for the future easier.

Sure, you could opt to house your retirement savings in a regular old bank or brokerage account. But neither of those accounts will give you a tax break along the way. The following accounts will. And they’re all worth taking advantage of if you can.

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1. Roth IRAs

With a Roth IRA, you don’t need an employer to make a retirement savings plan available to you. As long as you have earned income, you can open a Roth IRA on your own and manage it independently.

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Now Roth IRAs have much lower annual contribution limits than 401(k) plans. But they’re still a downright awesome retirement savings tool.

For one thing, Roth IRAs offer tax-free withdrawals in retirement. At a time in your life when money might get tight, it’ll be nice not to have to pay the IRS a chunk of your withdrawals in tax form.

Also, Roth IRAs don’t impose required minimum distributions (RMDs). That means you’ll have the option to let your money sit and grow tax-free for years on end. And if you’d like to gift some of your nest egg to your heirs, a Roth IRA will make that possible.

2. Roth 401(k)s

What makes 401(k) plans so great is that they come with generous annual contribution limits and are often eligible for employer matching dollars that don’t even count against those limits. So all told, you might really amass a fortune of money if you consistently max out a 401(k).

Meanwhile, a growing number of 401(k) plans are offering a Roth savings feature. And with that, you get tax-free withdrawals in retirement just like you would with a Roth IRA.

Now one thing you should know is that, unlike Roth IRAs, Roth 401(k)s die force you to take RMDs beginning at age 72. But because Roth 401(k) withdrawals aren’t taxable, those RMDs won’t add to your IRS liability — they’ll simply leave you with less money in your savings plan.

3. HSAs

Health savings accounts, or HSAs, aren’t retirement savings plans if you want to get technical. Rather, as the name so aptly implies, they’re tax-advantaged accounts you can use to sock away money for healthcare spending.

But here’s the thing — the funds in your HSA never expire, and you can invest money you aren’t using, so it grows into a larger sum over time. Since healthcare is a massive expense for many seniors, carrying a large HSA balance into retirement could make for a lot less financial stress during your later years.

Plus, you’re not necessarily limited to using your HSA for medical spending purposes. Once you turn 65, you’re allowed to take an HSA withdrawal for any reason penalty-free (whereas non-medical withdrawals prior to age 65 will generally incur a penalty). That means that if you don’t need all of your funds for healthcare spending purposes, you can treat the rest of that money as a general savings account to dip into. It’s a win-win.

Setting money aside in a Roth IRA, Roth 401(k), or HSA could really lead the way to a financially secure retirement. It pays to take advantage of these plans to build wealth for your future — and be thankful for them along the way.

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