TAX PLANNING WITH RETIREMENT ACCOUNTS- 2026 TAX YEAR

TAX PLANNING WITH RETIREMENT ACCOUNTS- 2026 TAX YEAR

Last Updated: 08/26/2026

Retirement may seem far away, but planning is essential. Different retirement accounts like 401(k), Roth IRA, Traditional IRA, 403(b), and SEP IRA can overwhelm your mind.

Although there are a variety of retirement accounts, they are easier to understand once broken down. Each account has different rules, though they all serve the purpose of saving money and investing for your future.

 

A tax-advantaged retirement account’s purpose is to save money for an individual’s retirement. Retirement accounts can provide tax benefits that help your investments grow over time.

The differences between retirement accounts are:

• Who can contribute to your account
• How much you are allowed to contribute
• When can you receive your tax benefits
• How withdrawals are taxed
• Can an employer contribute to the account
• What investment options are available

 

Types of Accounts

Traditional IRA:

A Traditional Individual Retirement Account is a type of retirement account that is established separate from the employer.

Contributions made to a Traditional IRA may be tax deductible depending on income, tax filing status, and whether the individual or spouse participates in an employer-sponsored retirement plan.

The money in this retirement account can be invested and raised tax deferred. Withdrawals made from the account are subject to ordinary income tax.

The Traditional IRA also can possibly create a tax deduction today while saving for retirement.

Catch-up are available for those 50 years or older.

 

Roth IRA:

A Roth Individual Retirement Account is a type of retirement account that is established separate from the employer.

Contributions to a Roth IRA account are made with money that is already taxed. This means the contributions do not provide a tax deduction like a traditional IRA, but qualified withdrawals can be tax-free.

Roth IRAs do not require a minimum distribution during the owner’s lifetime.

For individuals who are beginning their careers, this is an effective way to build a long-term retirement fund.

Catch-up are available for those 50 years or older.

 

401K: 

A 401(k) is an employer sponsored retirement plan. Usually, employees participate in this plan through the workplace than opening the account independently.

One advantage of 401(K) is the high contribution limit compared to the IRA. Employers may offer matching contributions to the employer account. This is where the employer matches the amount the employee contributes.

Traditional 401(k) contributions are made before federal and state income taxes on the employee’s pay, while Roth 401(k) contributions are made with after tax dollars.

 

Roth 401K:

A Roth 401(K) combines both the traditional 401(k) with Roth tax treatment.

Contributions are made with after-tax dollars, so employees do not receive immediate tax deduction. Qualified withdrawals can be tax-free.

 

403(b) Plans:

403(b) is like 401(k), but are specific to certain public schools, universities, nonprofits, and other qualifying organizations.

A 403(b) can provide tax-advantaged retirement savings and may include employer contributions.

 

 

SEP IRA & SIMPLE IRA:

SEP IRAs & SIMPLE IRAs are retirement plan options designed for small businesses and self-employed individuals.

A SEP IRA allows an eligible employer to make contributions on behalf of employees, including the business owner.

A SIMPLE IRA is another retirement plan option for small businesses and their employees

These accounts provide valuable retirement saving opportunities for individuals who do not have access to a traditional employer-sponsored 401(k)

 

Solo 401(k):

Self-employed individuals may also consider the Solo 401(k), this is referred to as an individual 401(k).

This plan is designed for business owners with no employees other than a spouse.

For eligible self-employed individuals, a solo 401(k) can be a great retirement saving

option.

 

 

 

 

The above information is of a general nature only and should not be relied upon for specific situations. Click here for additional income tax service information. 

Call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730 as required to set up an appointment.