Beyond the 401(k): Expanding Your Retirement Tool Belt

Retirement as a formal idea and lifestyle is a relatively modern concept. For most of human history, people worked until they were physically unable and then relied on family or community support. It wasn't until the industrial age that the concept of retirement was born. In fact, in 1875, the American Express Company established the first private pension plan in the United States. Fast forward to 1935, Social Security was established, and the first payment was made to Ida May Fuller in 1940 for $22.54.

While relatively new, retirement today is firmly established, making it essential to begin planning for life after work decades in advance. Last month, we discussed Social Security. Social Security will help supplement retirement income, but additional resources are required to support your needs and lifestyle after work ceases.

Think of building your retirement plan like building a comfortable financial house. To do the job right, you need the proper tools in your tool belt. This month, we will provide a brief overview of the various vehicles that are now offered via legislation that can help fund your retirement. We'll keep the discussion high-level, focusing on retirement options available outside employer-sponsored plans like 401(k)s and 403(b)s.

1. The Traditional IRA

Let's start with the traditional Individual Retirement Account, or IRA. As the name indicates, the account is opened by an individual, and it's independent of an employer.

• Anyone who has earned income may contribute to an IRA account.

• If eligible, contributions are tax deductible.

• In 2026, the maximum IRA contribution across all IRA accounts is $7,500 if less than 50 years old.

• If you are 50 or older, you may contribute up to $8,600.

• Earnings and capital gains in the IRA are tax deferred.

• Taxes are paid only when funds are withdrawn.

• Keep in mind that required minimum distributions (RMDs) apply, and early withdrawal penalties may occur.

2. The Roth IRA

A Roth IRA is similar.

• If you are eligible to open and contribute to one, contributions are made with after-tax dollars, and qualified withdrawals are not subject to federal income taxes.

• A Roth enables you to make tax-free withdrawals in retirement, and RMDs are not required.

• But contributions are made with after-tax dollars.

3. The SEP IRA

Business owners have the option of setting up a Simplified Employee Pension Individual Retirement Account, or what is commonly called a SEP IRA.

• A SEP IRA is an employer-funded retirement plan that allows a business owner to make contributions to IRAs set up for themselves and their employees.

• Self-employed individuals, independent contractors, and small and large businesses can take advantage of SEP IRAs.

• The SEP IRA contribution limit for 2026 is 25% of an employee's total compensation, up to $72,000.

4. The Solo 401(k)

The solo (individual) 401(k) for business owners is a powerful tool that can be used to defer taxes and save for retirement as long as you are a small business owner with no employees (except your spouse).

• In 2026, aggregate contributions are $72,000 if you're under 50, with an additional $8,000 in catch-up contributions if you're between 50 and 59 or 64 or older.

• If you are between 60 and 63, you may contribute an additional $11,250 in catch-up contributions.

• A major advantage is that the Secure 2.0 Act exempts RMDs in Roths.

5. The Health Savings Account (HSA)

Finally, let's review the Health Savings Account, or HSA.

• If you have a high-deductible healthcare plan and your plan has an HSA option, you may contribute up to $4,400 as an individual or $8,750 for family coverage.

• If over 55 or older, you may make an additional $1,000 catch-up contribution.

• It provides tax-deductible contributions, tax-deferred growth, and tax-free withdrawals if used for qualified medical expenses.

• It effectively doubles as a retirement account at 65 years old, as nonqualified withdrawals at 65 are taxed as regular income.

• Penalty-free withdrawals at age 65 for non-medical expenses—just pay the taxes as with an IRA.

Choosing the right approach, however, depends on your goals, employment status, income, and tax considerations. If you have questions, we're here to walk through your options and help find the best fit for you.