Retirement Plan Options & Contribution Limits Made Simple

Retirement Plan Options Made SimpleThere are so many retirement plan options out there today, but they don’t all apply to each of us. It can be hard to weed through them all. So how do you know what may work for you?

This article could make sorting through your choices and learning about contribution limits easier.

We’ll go through a number of retirement plan options for employees, for self-employed folks / contractors, for government employees, and for those in the military. We will also mention the plans that could work for anyone, in any career.

We’ll Lay Out the Main Retirement Plan Options and Contribution Limits For You Here

Many of them have names that seem odd, but don’t let that put you off. It doesn’t matter what they’re called. It matters what they could help you do: have money to live on when you retire.

And, it’s easy to get confused by all the odd numbers and names. Even President Trump mistakenly called a 401K a 409K recently:

Screenshot of President Trump's January 9, 2020 tweet stating STOCK MARKET AT ALL-TIME HIGH! HOW ARE YOUR 409K'S DOING? 70%, 80%, 90% up? Only 50%? What are you doing wrong?

His incorrect 409K tweet illustrates a few common errors people often make relating to retirement plans. Let’s use a 401k as an example:

  1. Your 401k does not go up or down on its own. The things within it do, individually. You should not invest all your money in a single thing.
  2. In fact, a 401k is not an investment. It’s a tax-advantaged plan that you can put money into. Then you have to choose what to invest that money in based on the options available where your plan is at. These options will vary a lot.
  3. You should not expect an investment to increase 50%-90% in a single year. In fact, if someone tells you they can get you that kind of return, RUN FAR AWAY! (Think Bernie Madoff.)
  4. It IS possible for something you invest in to increase dramatically, but it’s not likely and, again, a red flag for a scam. It’s also possible for something you invest in to go to zero.
  5. You’re not doing anything wrong if you’re not getting a 90% return on all your investments. You’re probably doing something right.
  6. You should get investing advice from someone who knows your situation and has a fiduciary duty toward you, not from tweets you see on the internet or from people in line at the grocery store, etc. A fiduciary duty means that the person has to be honest and act in your best interest.

It bears repeating that once you have chosen one or more retirement plans and put money into it, you will need to tell them what you want them to do with the money. That way they can invest it for you instead of just having it sit there.

With that said, we’ll list the main types of retirement plan options you will find in the US, broken down by categories for:

Be sure to read the one(s) that may apply to you, and check with a pro and your employer (if you have one) to be sure. You can click the links above if you want to jump straight to one of the categories.
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