Preparing for retirement is an important part of your financial foundation for the long term.    Important principles of retirement savings include :

• Starting as early as possible
• Investing as much as possible
• Diversifying among asset classes
• Living within your means 

Easy, right?  Did I mention there are choices of the types of accounts to invest in?  Let’s look at the most common choices for the majority of people. 

Types of Retirement Accounts 

Generally, but not always, the type of plan available to you is determined by your type of employment. Below is a   snapshot of the most common retirement plans for corporate employees, individuals, and small business owners or those who are self-employed. 

Company-Sponsored Plans 

401(k) – Private Sector 

• Tax Treatment: Pre-tax contributions (reduces current taxable income), taxed upon withdrawal, and/or after-tax contributions (do not reduce current taxable income), not taxed upon withdrawal
• 2025 Employee Contribution Limit: $23,500 ($31,000 if aged 50+) 
• Employer Match: Free money – always contribute enough to get a full match 
• Vesting: Understand the vesting schedule for employer contributions 

403(b) – Nonprofits/Government  (teachers, healthcare workers, nonprofit employees)

• Tax Treatment: Same as 401(k)
• 2025 Employee Contribution Limit: Same as 401(k), and may have additional catch-up provisions for long-term employees 
• Employer Match: Same as 401(k)
  • Vesting: Same as 401(k)

Individual Retirement Accounts 

Traditional IRA 

• Tax Treatment: Pre-tax contributions, taxed upon withdrawal 
• 2025 Contribution Limit: $7,000 ($8,000 if aged 50+) 
• Income Limits for Deductible Contributions: Deduction phases out at higher incomes and if you have a workplace plan 
• Required Distributions: Must start at age 73 (age 75 beginning in 2033).

Roth IRA 

• Tax Treatment: After-tax contributions, tax-free growth and withdrawals 
• 2025 Contribution Limit: Same as Traditional IRA (the contribution limit is the combined limit for all contributions to Roth and Traditional IRAs)  
• Income Limits for Roth Contributions: High earners are not eligible to make Roth contributions
• No required distributions during your lifetime 
• 5-year rule: Earnings can be withdrawn  tax-free after 5 years and age 59½ 

Self-Employment 

Self-Employed Retirement Account Options (2025 Limits) 

Solo 401(k) (Individual 401(k)) 

Best for: Self-employed individuals or business owners with no employees (except spouse) 

• Employee contribution limit: $23,500 ($31,000 if 50+) 
• Employer contribution limit: Up to 25% of compensation 
• Total annual limit: $70,000 ($77,500 if 50+) 
• Key advantage: Highest contribution limits, can borrow from account 
• Catch: No employees allowed (spouse okay) 

SEP-IRA (Simplified Employee Pension) 

Best for: Self-employed or small business owners with employees 

• Contribution limit: Up to 25% of compensation or $70,000, whichever is less 
• No catch-up contributions available 
• Key advantage: Simple setup, low maintenance 
• Catch: Must contribute equally for all employees (as percentage of pay) 

SIMPLE IRA 

Best for: Small businesses with employees wanting lower administrative burden 

• Employee contribution limit: $16,000 ($19,500 if 50+) 
• Employer match: Up to 3% of compensation (required) 
• Total possible: ~$19,000-20,000, depending on income 
• Key advantage: Lower administrative costs than traditional 401(k) 
• Catch: Lower contribution limits, 2-year waiting period for withdrawals

Defined Benefit Plan 

Best for: High-income self-employed professionals (doctors, lawyers, consultants) 

• Contribution limit: Based on actuarial calculations, can be $200,000+ annually 
• Key advantage: Massive tax deductions for high earners 
• Catch: Expensive to set up and maintain, requires actuarial services 

Traditional or Roth IRA (Backup Option) 

Always available regardless of self-employment status 

• Contribution limit: $7,000 ($8,000 if 50+) 
• Key advantage: Can supplement other plans 
• Catch: Low limits, income restrictions for Roth 

Quick Decision Framework for Business Owners: 

No employees? → Solo 401(k) (highest limits) 

Have employees? → SEP-IRA (simple) or SIMPLE IRA (if want employee contributions) 

High income solo practitioner? → Consider Defined Benefit Plan + Solo 401(k) 

Just starting out? → Begin with SEP-IRA or Solo 401(k), add Traditional/Roth IRA 

Retirement Funding Strategies 

Just to be clear, this is a different question or topic from “how much money will I need in retirement?”  Retirement funding strategies consider matching opportunities, legal limitations, and your ability to fund accounts. 

If you are under the age of 50 and you can afford it, start with your company’s 401(k) or 403(b) and contribute enough to get the full employer match; this is free money you should never leave on the table. Keep in mind that not all companies offer a match, but if they do, take advantage of it 

Next, prioritize maxing out a Roth IRA at $7,000 annually ($583/month) if your income allows, since you’re likely in a lower tax bracket now than you’ll be in retirement. 

 After maxing out the Roth IRA, return to your 401(k) and aim to contribute the full $23,500 limit. If you’re self-employed or have a side income, consider opening a SEP-IRA or Solo 401(k) for additional tax-advantaged savings. The key is to automate these contributions and increase them by 1-2% annually or whenever you get a salary increase.

If you are 50 years or older, the IRS allows additional “catch-up” contributions to help accelerate your retirement savings during your peak earning years. You can contribute an extra $1,000 to IRAs (bringing the total to $8,000) and an additional $7,500 to your 401(k) or 403(b) (raising the limit to $31,000).  If you’re behind on retirement savings, these higher limits, combined with your presumably higher salary, can help you make significant progress in your final working decades. Take full advantage of these limits if possible—your future self will thank you. Keep reading for other important retirement account considerations.

Suggestions for Asset Allocation 

In our next article, we are going to dive deeper into investing. For the purposes of this article, we will briefly touch on core investment principles. 

Core Investment Principles 

1. Diversify: Don’t put all your eggs in one basket 
2. Keep Costs low: Try to keep expense ratios under 0.5%
3. Stay Invested: Start early, stay consistent 
4. Rebalance periodically: Maintain target allocation 

Beneficiary Designations 

Beneficiary designations are very important.  They offer legal protection and help prevent unintended consequences. They should be reviewed annually and whenever there is a change in your family situation (death, divorce, illness).  You will need to have the birth date and social security number for each beneficiary and contingent beneficiary named.   

Legal Protections

• Supersedes your will – Beneficiary forms override whatever you wrote in your will 
• Avoids probate court – Assets transfer directly to beneficiaries, faster and cheaper 
• Cannot be contested like wills can be in court proceedings 

Family Consequences 

• Wrong person gets money – Ex-spouse, estranged family member, or deceased person could inherit 
• Unintended disinheritance – Current spouse/children might get nothing if forms are outdated 
• Complications for minors – Money goes to court-appointed guardian if no proper custodian is designated

Common Disasters 

• No beneficiary named – Account goes to your estate, triggering probate and taxes 
• Beneficiary predeceases you – Assets go to contingent beneficiary or estate if none is named 
• Outdated after life changes – Divorce, remarriage, births and deaths make designations obsolete 

Administrative Benefits 

• Faster access to funds – Beneficiaries get money in weeks, not months/years 
• Clearer instructions – Eliminates family disputes about your intentions 
• Professional management – Allows for continued investment growth during transition 

Bottom line: A simple form that takes 5 minutes to complete can save your family thousands of dollars and months of legal entanglement.

Action Items Checklist 

Immediate Actions (This Month) 

☐ Review Current Accounts 

• Log into all retirement accounts 
• Note current balances and contribution rates 
• Make sure beneficiaries are updated 
• Review investment options and fees 

☐ Maximize Employer Match 

• Verify that you are contributing enough for full match 
• If not, increase contribution immediately 
• Calculate annual match amount (it’s free money!) 

☐ Consider filling in the gaps

• No workplace plan? Open Traditional or Roth IRA 
• Have a workplace plan? Consider Roth IRA if income allows 
• Self-employed? Look into SEP-IRA or Solo 401(k) 

Ongoing Actions (Next 3 Months) 

☐ Increase Contributions if possible 

• Boost 401(k) contribution by 1-2% annually if possible 
• Max out IRA if possible ($583/month for 2025) 
• Use tax refunds and bonuses for retirement savings (taxable accounts) 

☐ Investment Review 

• Move to low-cost index funds if in expensive options 
• Set appropriate asset allocation for your age 
• Consider target-date fund if overwhelmed by choices 

☐ Automate Everything 

• Set up automatic contribution increases 
• Automate IRA contributions The key is to start now, even in small amounts. A 25-year-old saving $200/month will have more at retirement than a 35-year-old saving $400/month, thanks to compound growth! 
• For more information or to pose a retirement question, please contact Tammy@mosasicfi.com 
• Schedule an annual review calendar reminder 

Quick Start Priority Order: 

1. Get employer match (highest priority) 
2. Pay off high-interest debt (credit cards) 
3. Build emergency fund (3-6 months expenses) 
4. Max out Roth IRA (if income allows) 
5. Increase 401(k) beyond match 
6. Consider taxable investing (non-retirement accounts)

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Sources:  IRS, Investopedia 

Mosaic FI, LLC is a State of Illinois registered investment adviser. The opinions expressed herein are those of the firm and are subject to change without notice due to changes in the market or economic conditions and may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of Jenifer Aronson and Leslie Meisner, may differ from the views or opinions expressed by other areas of the firm, and are only for general informational purposes , July 15, 2025.

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