Retirement Investment Options

Pensions:

Back in the day, employers sponsored defined benefit plans, or pensions, for their employees. These pensions provided retirement payments in set amounts to employees, usually based on criteria like salary level and length of service. Participants did not contribute to and could not access the funds until retirement. All the funding and investment risks were on the sponsor and determined by complex actuarial calculations. This kind of pension plan has become uncommon – only about 15% of civilian workers have access to defined benefit plans in 2024.¹

Social Security:

Retirement benefits are paid by the federal government and available for people beginning at age 62 who have worked for at least 10 years.² Payments are determined by your salary levels and the age you start collecting benefits – you’ll receive more per month the longer you wait before collecting benefits, up to 70.² Originally meant to help supplement retiree income, the long-term viability of this program has come into question. Under current policies, the Social Security Administration projects that trust funds that pay out Old-Age and Survivor Insurance (OASI), when combined with the trust funds for Disability Insurance (DI), may run out by 2034.³

Personal savings:

This has always been a part of the three-legged retirement stool. Whether in the form of savings accounts, CDs, stocks, bonds, or a coffee can, personal savings is the most controllable leg. According to one study by the Federal Reserve, 54% of retirees without a private source of income or investments reported doing okay financially, compared to 93% of retirees who did have investments.⁴

A key part of the three-legged stool metaphor is that, like a stool, you have multiple income streams to support your retirement plan, which helps to balance out risks. Given the state of Social Security, it is possible that the “legs” of our future retirement plans, Social Security benefits aside, may include defined contribution plans, personal savings, and income from a side hustle.

Defined Contribution Plans:

These largely have replaced the pension plans of years ago. In 2025, 65% of civilian workers have access to defined contribution plans.⁵ These plans allow an employee to contribute part of their earnings into investments, which hopefully increase over time, providing a retirement nest egg. Employee stock ownership plans (ESOPs), profit-sharing plans, 401(k)s, and 403(b)s all can be considered defined contribution plans.⁶

Upon retiring with a defined contribution plan, you receive your entire account – all the contributions and investment gains and losses – rather than a set monthly payment like in a pension plan.⁷ Some defined contribution plans have tax benefits.⁸ Plans may have contribution limits, and most require participants to direct their own investments.⁹ Some include employer-contributed funds or company stock. By law, every retirement plan must have a written Plan Document describing how it works, and most also provide an easy-to-read “cliff notes” version of that document called a Summary Plan Description (SPD).10 Understanding your plan, or any investment vehicle for that matter, is the second most important rule of saving for retirement – after starting to save as early as possible.

Personal Retirement Savings Investment Options:

There are many investment options for personal retirement savings, a good thing since personal savings are a significant way to contribute to your retirement savings at any time. These accounts, which vary in terms of tax advantages, contribution limits, and withdrawal policies include:⁶

• Traditional Individual Retirement Arrangement (IRA).
• Roth IRA.
• SEP IRA.
• Simple IRA and Simple 401(k).
• Solo 401(k).

For detailed descriptions of each of these retirement savings options, read “Different Types of Retirement Plans.”

Keep working:

This may sound surprising, but continuing to work after retirement is a growing trend that could become a core part of the retirement stool, especially for millennials. In 2024, 4% of Americans reported working post-retirement, according to the Federal Reserve.¹¹ Because future retirees may also be more tech-savvy, they may be able to remain in the workforce even longer, making the retirement age of 65 a thing of the past. Earnings from the extra working years may likely be an important part of retirement plans.

When it comes to planning how much you’ll need to save for retirement, it can be helpful to break it down by age. Depending on your retirement goals, this may look like:¹²

• Age 30. Consider having at least your current annual income saved for retirement.
• Age 40. You may want to have socked away three times your current income.
• Age 50. Consider having around six times your current income put away toward retirement.
• Age 60. Look to have around eight times your current annual income.