Retirement Accounts Cheat Sheet
Major Retirement Account Comparison
| Account | 2025 Contribution Limit | Tax on Contributions | Tax on Growth | Tax on Withdrawals |
|---|---|---|---|---|
| 401(k) | $23,500 ($31,000 if 50+) | Pre-tax (reduces taxable income) | Tax-deferred | Taxed as ordinary income |
| Roth 401(k) | $23,500 ($31,000 if 50+) | After-tax (no deduction) | Tax-free | Tax-free (qualified) |
| Traditional IRA | $7,000 ($8,000 if 50+) | Pre-tax (if deductible) | Tax-deferred | Taxed as ordinary income |
| Roth IRA | $7,000 ($8,000 if 50+) | After-tax (no deduction) | Tax-free | Tax-free (qualified) |
| SEP IRA | 25% of comp or $70,000 | Pre-tax | Tax-deferred | Taxed as ordinary income |
| SIMPLE IRA | $16,500 ($19,500 if 50+) | Pre-tax | Tax-deferred | Taxed as ordinary income |
| HSA | $4,300 indiv / $8,550 family | Pre-tax | Tax-free | Tax-free (medical expenses) |
| 529 Plan | Varies by state (gift tax limits) | After-tax | Tax-free | Tax-free (education expenses) |
Traditional vs. Roth: Decision Framework
| Factor | Traditional (Pre-Tax) | Roth (After-Tax) |
|---|---|---|
| Tax Break Timing | Now — reduces current taxable income | Later — tax-free withdrawals in retirement |
| Best When | You’re in a high tax bracket now and expect lower in retirement | You’re in a low tax bracket now and expect higher later |
| RMDs (Required Minimum Distributions) | Required starting at age 73 | No RMDs for Roth IRA (Roth 401k has RMDs unless rolled to Roth IRA) |
| Income Limits | No income limit to contribute (deductibility may be limited) | Roth IRA: phaseout at $150k–$165k single / $236k–$246k married |
| Early Access | 10% penalty + taxes before 59½ | Contributions can be withdrawn penalty-free anytime |
| Estate Planning | Heirs pay income tax on distributions | Heirs receive tax-free distributions |
Withdrawal Rules & Penalties
| Account | Penalty-Free Age | Early Withdrawal Penalty | RMD Start Age | Key Exceptions |
|---|---|---|---|---|
| 401(k) / Traditional IRA | 59½ | 10% + income tax | 73 | Rule of 55, first-time home ($10k), disability |
| Roth IRA | 59½ (5-year rule) | 10% on earnings only | None | Contributions always penalty-free |
| HSA | 65 (for non-medical) | 20% if non-medical before 65 | None | Medical expenses always tax and penalty-free |
| 529 Plan | Any age (for education) | 10% + tax on earnings for non-education | None | Up to $10k/year for K-12 tuition |
Employer-Sponsored Plans
| Feature | 401(k) | 403(b) | 457(b) | TSP (Federal) |
|---|---|---|---|---|
| Who Qualifies | Private sector employees | Nonprofits, schools, churches | State/local govt, some nonprofits | Federal employees, military |
| 2025 Limit | $23,500 | $23,500 | $23,500 | $23,500 |
| Catch-Up (50+) | $7,500 | $7,500 | $7,500 | $7,500 |
| Employer Match | Common | Less common | Rare | Up to 5% match |
| Early Withdrawal | 10% penalty | 10% penalty | No penalty (govt plans) | 10% penalty |
Key Takeaways
- Traditional accounts give you a tax break now; Roth accounts give you tax-free income in retirement
- Always contribute enough to get the full employer match — it’s free money
- The HSA offers the best tax treatment of any account (triple tax advantage)
- Roth IRAs have no RMDs, making them powerful estate planning tools
- Contribution limits and income thresholds change annually — verify current figures with the IRS
Frequently Asked Questions
Should I choose a Traditional or Roth 401(k)?
If you expect to be in a higher tax bracket in retirement (early career, rising income), choose Roth. If you’re in your peak earning years and expect lower income in retirement, Traditional usually wins. Many advisors recommend splitting contributions between both for tax diversification.
Can I contribute to both a 401(k) and an IRA?
Yes. The 401(k) and IRA have separate contribution limits. You can max out both. However, your ability to deduct Traditional IRA contributions phases out if you’re covered by an employer plan and your income exceeds certain thresholds.
What is the Rule of 55?
If you leave your employer in the year you turn 55 or later, you can withdraw from that employer’s 401(k) without the 10% early withdrawal penalty. This doesn’t apply to IRAs or previous employer plans — only the 401(k) of the employer you separated from.
What happens to my 401(k) if I change jobs?
You have four options: leave it with your former employer, roll it into your new employer’s plan, roll it into an IRA (most popular for more investment options), or cash it out (worst option — penalties + taxes). A direct rollover avoids tax consequences.
How does the backdoor Roth IRA work?
Contribute to a non-deductible Traditional IRA, then convert those funds to a Roth IRA. You pay tax only on any gains between contribution and conversion. This bypasses Roth income limits. Be aware of the pro-rata rule if you have pre-tax IRA balances.