We all look forward to that time when we can hang our work clothes and take that long-awaited vacation in the name of retirement. You can see the picture. Bonding with your grandchildren in the summers, taking those hikes you have been itching to participate in and oh, that long-awaited cruise! However, all these plans could easily get cut short if you do not have the right retirement plan in place. It is therefore essential that you pay attention to the avenues in which you invest your money while you still have the energy to make more. Here are the two retirement investing options to consider:

The employer-sponsored plans

Most people working in organizations have some form of agreement with their employer that once they retire, they will get some income owing to their years of service. As such, employees embark on saving a given amount of money per month in the hope that it will mature and give them adequate funds to live on when the time comes. Some employers offer matching funds which enable employees to walk away with twice what they could have gotten if this were not the case.

There are two main categories in this regard: the defined benefits and the defined contribution plans.

Defined benefits

In the first option, your employer specifies the amount of money you will receive per month. This figure gets arrived at by taking your years of service as well as your salary into account. Your employer could also base the amount on a fixed dollar amount. In this system, your employer sponsors the plan and hires experts to invest the money. If anything goes wrong, your employer shoulders the risks. These schemes also go by the name pension plans.

Defined contributions

In the second option, there is no specific amount of money set as your monthly payment. Here, you or your employer contributes a given percentage of your income to a given account. In some cases, both you and your employer provide funds to the plan at a set rate. However, there is a downside to this account. Where in pension plans the employer faces risks, any losses that occur in this option affect the employee. As such, your money will be subject to changes owing to losses or gains in investments. If the investment does well, you walk away with a lot of money. If it fails, you walk away with what is left. An example of such a plan is the 401 (k).

Individual retirement accounts

These plans provide tax advantages for savings, and you can contribute as much as you can; provided it does not exceed the limit set by the internal revenue service. You can invest in quite a number of these:

Traditional account

The contributions you make to this account are subject to taxation. However, you will not pay any taxes as to any earnings made on this account until you make a withdrawal upon retirement.

Roth account

The contributions you make to this account owe to your income after taxation, and as such, you will not get taxed when depositing funds. You will also not pay tax as to earnings made from the money as well as when withdrawing the funds.

SEP account

This account works for employers who make retirement contributions in the name of their employees. This plan is typical of people running small businesses as well as those who are self-employed.

Simple account

For small businesses looking to save costs and establish retirement plans for their employees, this is a great place to start. It has less stringent contribution limits and allows employers to match the savings of their employees.

Looking into the various retirement investing options and their features will enable you in deciding what will work best for you. Remember to read up on wise investment choices. All the best of luck!