9 Types of Retirement Accounts You Should Know

Glenn Kirst is a planning excellence lead consultant at Northwestern Mutual.

When it comes to saving for retirement, 401(k)s and individual retirement accounts (IRAs) are probably the most well-known options. But there are many different types of retirement accounts, each with its own pros and cons (like eligibility requirements and tax rules).

Whether you’re an employee or your own boss, here’s a look at nine types of retirement accounts that you can use to save for retirement.

Employer-sponsored retirement accounts

Retirement accounts made available through work are known as employer-sponsored accounts. These include the following:

1. 401(k)

What it is: A 401(k) is a popular employer-sponsored retirement account. Contributions are made automatically with each paycheck, and employees may receive a partial or full match from their employers, allowing them to more quickly build their retirement nest egg.

These accounts come in two main varieties: traditional and Roth.

In a traditional 401(k), contributions are made with pre-tax money, lowering your taxable income for the year contributions are made. When withdrawals are made in retirement, those withdrawals are taxed.

In a Roth 401(k), contributions are made with after-tax money. This means there are no tax savings when contributions are made, but withdrawals will generally be tax-free in retirement.

Who it’s for: Eligible employees of private, for-profit companies.

2025 contribution limits: Up to $23,500 per year for those younger than 50. Up to $31,000 per year for those 50 and older, except those aged 60-63, for whom the limit is $34,750.

It’s important to stay aware of these amounts so that you don’t incur a tax penalty known as “excise tax.” If you think you have contributed too much, talk with a financial advisor and tax advisor. You may be able to withdraw the excess contribution (and any earnings) to avoid taxes or penalties.

2. 403(b) plan

What it is: A 403(b) is a retirement account offered to employees of some public schools and certain government and other nonprofit organizations. They used to be called tax-sheltered annuities and are like 401(k)s, in that:

• 403(b)s can be either traditional or Roth.
• Employers may choose to provide a partial or full match to employees’ 403(b)s.
• 403(b)s have the same contribution limits as 401(k)s.

Who it’s for: Eligible employees of public schools and government and other nonprofit organizations.

2025 contribution limits: Up to $23,500 per year for those younger than 50. Up to $31,000 per year for those 50 and older, except those aged 60-63, for whom the limit is $34,750.

3. 457(b) plan

What it is: A 457(b) deferred compensation plan is a retirement account available to eligible employees of state and local governments, including civil servants, police officers, firefighters and others. The 457(b) is similar to a 401(k), including:

• Both come in either traditional or Roth varieties.
• Both share the same contribution limits.
• Both offer a potential employer match.
  
  

And 457(b) accounts usually have the same contribution limits as a 401(k) or 403(b) account—but there are certain differences you should be aware of. If you need to make a withdrawal from your 401(k) or 403(b) before you are of retirement age (59½), you will typically be subject to a 10 percent penalty. This penalty does not impact savers with a 457(b) account.

Who it’s for: Eligible state and local government employees.

2025 contribution limits: Up to $23,500 per year for those younger than 50. Up to $31,000 per year for those 50 and older. People in their final three working years before retirement can contribute more depending on their contribution history, up to a maximum of $47,000 per year.

4. SIMPLE 401(k)

What it is: A SIMPLE 401(k) is a special type of account for businesses with fewer than 100 employees. It’s like a regular 401(k), with a few key differences:

• Employers offering a SIMPLE 401(k) are required to provide a contribution. This may be either a dollar-for-dollar match (up to 3 percent of the employee’s annual pay) or a nonelective contribution of 2 percent of the employee’s annual pay.
• Employer contributions to a SIMPLE 401(k) are vested automatically (meaning they’re available if the employee leaves the company), while employer contributions to regular 401(k)s typically vest over time.
• The contribution limit for a SIMPLE 401(k) is lower than for a regular 401(k).
  
  

Who it’s for: Eligible employees working at companies with fewer than 100 workers.

2025 contribution limits: Up to $16,500 per year for those younger than 50. Up to $20,000 per year for those 50 or older, except those aged 60-63, for whom the limit is $21,750.

5. SIMPLE IRA

What it is: Like the SIMPLE 401(k), the SIMPLE IRA is a retirement account for businesses with fewer than 100 workers. SIMPLE IRAs have other similarities with SIMPLE 401(k)s, including:

• Employers are required to provide an employer contribution. This can either be a dollar-for-dollar match (up to 3 percent of the employee’s annual pay) or a nonelective contribution of 2 percent of the employee’s annual pay. That said, with a SIMPLE IRA, employers have more flexibility around contributions compared to a SIMPLE 401(k).
• Employer contributions to a SIMPLE IRA vest immediately instead of over time.

Unlike a SIMPLE 401(k), there is no Roth version of a SIMPLE IRA. Additionally, while a SIMPLE 401(k) may allow for loans, you cannot borrow from your SIMPLE IRA. If an employee participates in any other employer plan during the year and has elective salary reductions under those plans, the total amount of the salary reduction contributions that an employee can make to all the plans they participate in is limited to $23,500 in 2025.

Who it’s for: Eligible employees working at companies with fewer than 100 workers, as well as individuals who are self-employed or sole proprietors.

2025 contribution limits: Up to $16,500 per year for those younger than 50. Up to $20,000 per year for those 50 or older, except those aged 60-63, for whom the limit is $21,750.

Personal retirement accounts

Besides the employer-sponsored accounts listed above, you can also open a personal retirement account on your own. Some of these can be opened in addition to an employer-sponsored plan, while others are intended to replace employer-sponsored plans (for example, in the case of those who are self-employed).

1. Individual retirement account (IRA)

What it is: An IRA is an individual retirement account that does not need to be sponsored by an employer.

Like 401(k)s, IRAs are tax-advantaged and can come in either traditional or Roth varieties. Differences between IRAs and 401(k)s include:

• IRAs tend to offer more investment options compared to 401(k)s, allowing you more control over how you save for retirement.
• IRAs have much lower contribution limits.
• To make the full contribution to a Roth IRA, you must fall under a certain income limit.

Who it’s for: Anyone who has earned income during the year may be able to contribute to an IRA. Eligibility and the amount can vary based on income.

2025 contribution limits: Depends on your income; up to $7,000 per year for those younger than 50 and $8,000 per year for those 50 or older.

2. SEP IRA

What it is: A simplified employee pension, or SEP IRA, is a type of retirement account primarily for individuals who are self-employed (and for some employees of small businesses).

SEP IRAs are often described as a mix between an IRA and a 401(k). This is primarily because an SEP IRA has a much higher contribution limit compared to a regular IRA. And though you cannot open a Roth SEP IRA, you can roll your SEP IRA over into a Roth IRA.

Who it’s for: Self-employed individuals, small-business owners and some employees of small businesses.

2025 contribution limits: Either $70,000 or 25 percent of the individual’s compensation for the year (whichever is lower).

3. Solo 401(k)

What it is: A solo 401(k) is a plan for a single self-employed person. It may also be known as an individual 401(k), solo(k), uni-(k) or one-participant (k).

It shares many of the characteristics of a regular 401(k) but with some important differences. You can make contributions as both the employee and employer. These contribution limits are divided into two buckets:

• As the employee, you are eligible to contribute the same amount as individuals enrolled in other 401(k) plans. This means that individuals younger than 50 can contribute up to $23,500 per year to the plan, and those 50 or older can contribute up to $31,000 per year.
• As the employer, you are eligible to make an additional contribution of up to 25 percent of your compensation for the year (up to the total limits mentioned above) and up to a compensation limit of $350,000.
  
  

Who it’s for: Self-employed individuals and solo entrepreneurs.

2025 total contribution limits: Up to $70,000 per year for those younger than 50 (as long as this doesn’t exceed the employee’s annual compensation). Up to $77,500 for those 50 and older, except those aged 60-63, for whom the limit is $81,250. All amounts depend on your compensation for the year.

4. Spousal IRA

What it is: This is one of the tools available once you combine finances. To qualify, you must be married and file a joint tax return. Opening a spousal IRA allows a working spouse to contribute to an IRA for the non-working spouse. Spousal IRAs are governed by the same rules as regular IRAs and can be either traditional or Roth.

Who it’s for: Non-working spouses who have not earned income for the year.

2025 contribution limits: Up to $7,000 per year for those younger than 50. Up to $8,000 per year for those 50 or older.

All contribution limits are as of 2025 and are subject to change.

This article is not intended as legal or tax advice. Northwestern Mutual and its financial representatives do not give legal or tax advice. Taxpayers should seek advice regarding their particular circumstances from an independent legal, accounting or tax adviser.

All investments carry some level of risk, including the potential loss of all money invested.

Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.