401(k): A plan in which you contribute a percentage of your salary on a pretax basis, which can help reduce your taxable income. (The downside: It will be taxed when you dig into it during retirement.) Employers may choose to match your contributions.
403(b): The 403(b) is a kissing cousin to the 401(k), but is offered at public schools and tax-exempt organizations like libraries, hospitals, and churches.
Traditional IRA: An account in which you can contribute up to $5,000 in 2010 alone. There’s no income limit and contributions are tax-deductible if your joint income is under $109,000 and you don’t contribute to a 401(k). You will, however, pay the tax man once you start milking it during your senior years.
Roth IRA: You can contribute $5,000 just like a traditional IRA, but that’s with after-tax dollars; it’s not deductible, and only joint filers with an income under $177,000 qualify. The upside: Wait until you’re 59 ½ to withdraw, and you won’t pay taxes at all.
Roth 401(k): Available at a growing number of companies, a Roth 401(k) is similar to a traditional 401(k) but is funded with after-tax dollars—and the money isn’t taxed when you take it out.
Spousal IRA: If you’re not working or staying at home to raise the kids, you can still amass a nest egg by using your mate’s income to fund a spousal IRA. (It can either a traditional or Roth depending on your income.)
SEP IRA: If you’re self-employed (e.g. part-time consulting), consider opening a SEP IRA, where you can stock away much more than with a traditional or Roth IRA.
-- Judy Dutton
Jul 15, 2010
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