When you invest for retirement, you typically have three main options:
- You can put the money into a retirement account that's offered by your employer, such as a 401(k) or 403(b) plan. These plans are great deals because the money will grow tax-free until you withdraw it in retirement. What's more, you escape taxes either on the money you put into the plan or the money you withdraw from the plan, depending on whether you choose a traditional or Roth option.
- You can put the money into a tax-advantaged retirement account of your own, such as an IRA. IRAs offer similar tax breaks to 401(k)s, though some of the eligibility rules differ.
- You can put the money into a regular investment account that doesn't have tax advantages.
The first two options are far better deals, but there are limits on how much money you can put into them each year. If you've put all the money you're allowed into tax-favored plans and you want to save even more for retirement (for example, because you got a late start in saving and need to make up for lost time), you'll have to use a regular investment account.