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Saving for retirement — we all know it’s important, but we may not totally understand how to do it. Investing in your employer’s 401(k) can be a great start, but there are other vehicles to explore to get you to your retirement goal. Check out the other account types you can use to grow your nest egg instead of or in addition to your 401(k).

1. Roth IRA

Even though your employer provides a retirement savings vehicle, you can still fund your future with an individual retirement account, or IRA. A Roth IRA is funded with after-tax dollars. You don’t deduct your contributions when you file your tax returns, essentially saving your tax break for later and meaning you don’t pay income tax on your original contribution or the money you earn over the years. There are no required minimum distributions with a Roth account. Keep in mind, though, that there is an income cap and the Roth IRA generally offers the biggest benefit to young savers.

2. SEP-IRA

A Roth is not the only IRA option. The Simplified Employee Pension, or SEP-IRA, may be less well known than the traditional and Roth options, but still offers tax advantages. If you are a sole proprietor, business owner, self-employed, or just have a side business separate from your 9-to-5 gig, you can deposit money into an SEP IRA and contribute retirement accounts to any employees you may have. There are required minimum distributions and contribution rules, but contributions are tax-deductible as business expenses and the business pays no taxes on the investments’ earnings.

3. Taxable Investment Account

Having a brokerage account separate from your 401(k) and IRA can be a great tool. Your earnings may be subject to capital gains tax, but there are advantages that can outweigh that. There are no annual contribution limits or required minimum distributions, and there is a current 15% to 20% federal rate on qualified gains and dividends. It’s a good idea to choose taxable investments for your retirement savings with low expenses (fees).

4. Health Savings Account

If you are enrolled in a high-deductible insurance plan, you can start an HSA to help you save for medical care. This can also be a source of income in retirement. Your contributions are tax-deductible, and distributions used for qualified health care expenses can be tax-free. Some employers even match a certain percentage of what you put into this account. Just keep in mind that you will have to pay a 20% penalty if you pull the money out before age 65. Also, there is a contribution limit, and you will have to pay taxes on any withdrawals used for purposes other than healthcare.

5. Deferred Variable Annuity

Deferred variable annuities provide mutual-fund-like accounts in which you can invest your money. An insurance company then provides a stream of income for you in retirement with the dividends. Your potential for growth increases as the market rises, but you have a guaranteed protection up to a certain amount in case the market declines. Your payout is based on whatever is higher between the investment-account balance and a guaranteed amount growing on a fixed percentage each year. The longer you delay payouts, the more money you can make. There are cons to this strategy — some say that these annuities are too expensive as annual insurance and investment fees average out to around 3.5%. 

As you can see, there are plenty of other options for building wealth and reaching your retirement goals.

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