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August-September 2018


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Understanding Your Retirement Savings Options

By John Brummitt


If you asked the average American if he or she is good at handling money, the most common answer would be no. Interestingly, a recent study showed that one in six Millennials has $100,000 squirreled away in some type of saving or investment fund, and close to half of Millennials have at least $15,000 put away for the future. While Millennials stereotypically are viewed as not being good with money, many are doing much better than previous generations. In spite of being a generation saddled with enormous student debt, lack of employment opportunities, and frequent job changes, they manage to be conscientious about their finances. Their greatest fear regarding the future is not saving enough.

Generation X falls behind Millennials on this front, but this generation is beginning to catch up. As more and more of the Boomers reach retirement unprepared, younger generations realize more work needs to go into preparations for the future.

In today’s world, retirement planning options are almost endless. While any number of vehicles will carry you to retirement, six should top your list:

  • 401(k) and 403(b). (Board of Retirement is a 403(b) plan.) For most people, these employer-sponsored retirement plans are the easiest and best place to start investing for retirement. These plans have high contribution limits and usually the cheapest fees since they pool large amounts of assets.

  • Solo 401(k). These work like an employer 401(k) but are available for sole proprietors.

  • SEP IRA. SEP stands for Simplified Employee Pension and is primarily used for self-employed or small business owners. These accounts are easier to set up than Solo 401(k).

  • Simple IRA. This plan allows employers with less than 100 employees to set up IRAs with less paperwork. Employers must either match employee contributions or make unmatched contributions.

  • IRA. Anyone can contribute to an IRA. You can receive a tax deduction on your contributions, as long as your taxable income remains under a certain limit.
    Note: All earnings on all of the accounts above are tax-deferred until withdrawal. Contributions also lower your taxable income for the year they are contributed.

  • Roth IRA. Roth IRAs are a little different: you do not deduct contributions from your current taxes. Interest gained on these funds grows tax-free and you pay no tax, as long as certain criteria are met, such as withdrawal after age 59 and a half.

The savings option you choose will depend on your situation. If you work for an employer offering matching contributions, always take the match. You are guaranteed 100% return on your investment. If you don’t have the option of participating in an employer-sponsored plan, either an IRA or a Roth IRA is a good place to start. An IRA can act as a “secondary” retirement account for those who have employer retirement plans already.

Understanding your retirement savings options allows you to get the most out of your retirement. Knowing which vehicle provides the greatest opportunity to accumulate assets and deliver the greatest tax benefits not only frees up funds in the present but in the future as well. No matter what option you choose, the next steps are all the same: start saving early; be consistent in your contributions; and do not touch it before retirement.

About the Writer: John Brummitt became director of the Board of Retirement in January 2016. He graduated in 2011 with an MBA from Tennessee Tech University. A 2004 graduate of Welch College, he has been with the Board of Retirement since the spring of 2006. Learn more about retirement options:



©2018 ONE Magazine, National Association of Free Will Baptists