Retirement Accounts: Which is Best for Me?

 Retirement Accounts: Which is Best for Me?
🕒 Reading time: 4 minutes

If you’ve ever said, “I don’t even know where to start with retirement,” you’re not alone.

One of the biggest mindset shifts new investors need to make is understanding which account to use—because not all retirement accounts are created equal. But once you get this part down, everything else (like what to invest in) becomes way easier.

Here’s how to think about retirement accounts in simple terms:

🪣 Bucket #1: Employer-Sponsored Accounts (Your 401(k), 403(b), and 457)

This is a common starting point. If you’ve ever worked at a job that offered a 401(k), you’ve already been introduced to this bucket.

✅ These accounts are set up through your employer.
✅ Your paycheck contributions are often automatic.
✅ You may even get a company match (a.k.a. free money).

Examples include:

• 401(k) (private companies)

• 403(b) (non-profits, schools)

• 457 (government employees)

In Canada? Your equivalent might be an RRSP.

🧠 Think of this bucket as your work-sponsored vehicle. But here’s the key: just because it’s your first account doesn’t mean it should be your only one.

🪣 Bucket #2: Individual Retirement Accounts (IRAs)

IRAs are DIY accounts. You open them yourself—no employer required.

✅ You own it, no matter where you work
✅ You can contribute independently of a job
✅ You have more control over your investments

There are two main types:

• Traditional IRA – contributions are often pre-tax

• Roth IRA – contributions are post-tax, but withdrawals are tax-free

In Canada, your equivalents might be TFSA or RRSP, depending on your goals.

💰 Tax Buckets: Traditional vs. Roth (This Is Where Most People Get Confused)

Every retirement account falls into one of two tax buckets:

Here’s the cheat code:

• If you want a tax break today, go traditional.

• If you want to grow tax-free forever, go Roth.

And yes—you can have both. Many people do.

🔁 Can You Convert Between Accounts?

Yes. You can roll over:

• A 401(k) to a Traditional IRA

• A 401(k) to a Roth IRA (but you’ll owe taxes!)

This second rollover option is called a Roth conversion—and it’s powerful when done right. Some people do it in chunks over a few years to spread out the tax hit.

💡 Always talk to a tax advisor before doing this.

🧱 The Foundation: Combine These Accounts Strategically

You don’t have to pick just one. In fact, here's a popular basic structure:

Yes, you can mix and match. Yes, you can grow multiple accounts over time. The real power is in understanding what each account does for your long-term plan.

🚧 The Backdoor Roth: For High Earners

If you make too much money to contribute to a Roth IRA directly (over $140k for single filers, $240k for married in 2025), there’s still a way in.

It’s called the Backdoor Roth IRA.

It works like this:

1. Contribute to a Traditional IRA (non-deductible)

2. Convert that money to a Roth IRA

3. Watch out for the pro-rata rule if you already have a Traditional IRA

It’s 100% legal. Just a little extra paperwork. And again—talk to your tax advisor before you do it.

📊 Final Word

Start with the right buckets. Understand the tax rules. Then fund those accounts consistently.

Once the foundation is in place, the investing strategy becomes way simpler.

— Steve

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The following article is strictly the opinion of the author and is not to be considered financial/investment advice. CTL Community LLC and the author of this article do not claim to be a registered financial advisor (RIA) or financial advisor. Please visit our terms of service and privacy policy before reading this article.  "Call to Leap may earn affiliate commissions from the links mentioned. Call to Leap is part of an affiliate network and receives compensation for sending traffic to partner sites such as ImpactRadius, CardRatings, MyBankTracker, and more."