Different retirement accounts have different rules, restrictions, benefits, and special qualities. Let’s dive in, look at the options, and decide which type is the best retirement account overall!
Savings accounts are reliable. There’s virtually no risk that you’ll lose the money you deposit since qualifying US savings accounts are insured by the FDIC up to $250,000.
Ultimately, a savings account is not an appropriate place for the bulk of your hard-earned money, primarily due to inflation. Inflation in the US averages over 3% per year while the average savings account interest rate is about 0.1%.
Defined contribution plans are basically the reverse of a traditional pension plan. Instead of receiving a fixed income from the investments like a pension offers (a “defined benefit”), you receive a variable return on your investment based on what you put into the plan (a “defined contribution”).