Gone are the days when workers could look forward to the golden years and count on an employee pension plan and Social Security to cover their expenses while they enjoy the golf course. Today, you must be responsible for securing and planning for your own retirement.

There are several retirement plan options, tax breaks, and employer benefits offered, but knowing what to do now, so you can rest easy later, can be tricky. We’ve broken down the acronym-rich list of options to show you the best retirement option for you and the pros and cons of each.

401(k):

This is a savings account that allows you to make pre-tax contributions straight from your paycheck. Often times, an employee’s contributions are matched by the employer up to a certain amount. No tax is due on growth until the money is withdrawn.

Other variations of this same plan: 403(b) or 457(b), which are similar accounts offered by certain types of organizations, churches and public schools offer 403(b) and government employees are offered a 457(b).

Pros:

By contributing to a 401(k) or 403(b) it lowers the amount of income your taxes are based on (If you earn $75,000 and contribute $10,000, you are taxed on a $65,000 income). If your employer offers to match any contributions, that’s basically free money, which is a huge benefit.

Cons:

If you withdraw early (before 59 ½), the funds are subject to a penalty fee of 10 percent.

IRA:

This is an individual retirement account that allows you to invest your own contributions without tax penalties. If you withdrawal funds before you turn 59 ½, it is subject to a penalty fee.

Pros:

Your contributions lower your taxable income, and you have the power to invest them as you’d like through stocks, bonds, mutual funds, etc.  

Cons:

If you withdraw early (before 59 ½), the funds are subject to a penalty fee of 10 percent.

Roth IRA:

This retirement account is different from an IRA because the contributions are made after taxes are already taken out of your paycheck. However, the money is never taxed again, so you can make a withdraw at any age.

Pros:

You can withdraw your contributions any time without penalties.

Cons:

If you withdraw early (before 59 ½), the funds are subject to a penalty fee of 10 percent.

Profit Sharing:

In this plan, employers use a portion of company profits to fund a retirement plan. The amount and participation opportunity is entirely up to your employer, employees make no contributions.

Pros:

This is an amazing opportunity if you’re offered it from your employer, it can provide otherwise unavailable retirement funds.

Cons:

Because it’s at the discretion of your employer, sometimes it may be an unreliable option.

SEP-IRA:

This is a retirement plan often used by businesses who only have a few employees. The employer makes the contribution at their discretion. There are some restrictions, and the contribution is usually based on a percentage of their income.

Pros:

If you are self-employed and have no one working for you, this also allows you to contribute a portion of your income to your own retirement account, and deduct that from your income taxes. The maximum contribution limits for a SEP-IRA are higher than most other tax-favored retirement accounts.

Cons:

The employer makes contributions at their own discretion, so it’s important to monitor the contributions to ensure your needs are met.

Defined Benefit:

This is rare, but sometimes used by a company that has a large number of retiring employees at once. Basically, the employees contribute up to 100 percent of their income over a consecutive 3-year period and is then granted a guaranteed retired benefit.

Over time, you may accumulate one or more accounts along the way. You can consolidate your 401(k) from one employer with another, you can add a Roth IRA on your own, and change account holders as you’d like. The best method is to start something and start early. The earlier the better for retirement planning. When you plan for your retirement, stick to it. The temptation to withdraw money from your 401(k) when life gets tough is tempting, but you’re always better off to leave retirement funds to retirement.

Gone are the days when workers could look forward to those golden retirement years and count on an employee pension plan and Social Security.