There are many different types of retirement plans out there. And yet an estimated 64% of Americans aren’t prepared. What’s even worse is that nearly half don’t seem to care. And relying only on Social Security in retirement is a recipe for disaster.

For average earners, Social Security replaces about 40% of pre-retirement income. And you better believe that’s not going to cut it for most seniors. A more realistic figure is that folks need around 80% of their pre-retirement income to get by.

The “80% rule” comes from the fact that in retirement, you won’t be paying payroll taxes toward Social Security. You also won’t be spending money going to and from work. That means fewer transportation-related expenses and fewer dry-cleaning bills. Plus, you won’t need to be funneling money toward your retirement plan anymore. That is, if you have any sort of retirement plan to begin with.

If you have any hope of enjoying post-work life, it’s going to take some planning. At least if you want to enjoy retirement… and not live in constant fear of running out of money. After all, running out of money in retirement is a larger worry for Americans than declining health.

To make matters worse, constantly worrying about money is hazardous to your health. And considering health expenses tend to go up with age, this is doubly problematic.

The assumption is that healthcare costs go down once folks are eligible for Medicare. But this is far from true. There are lots of hidden costs even after enrollment. And they add up quickly. A healthy couple at retirement age can expect to spend $606,337 on medical expenses, according to Healthview Services. So entering retirement with some type of retirement plan is crucial.

Here are some of the most popular…

List of Popular Retirement Plans

401(k) Plans

When it comes to retirement plans, the 401(k) is among the most popular out there. These are typically employer-sponsored retirement plans. These have become popular because employees set up tax-advantaged contributions from their paychecks. And many employers match contributions up to a certain level. Those who have a 401(k) plan will want to check the details in their plan’s summary description.

Like any retirement plan, the sooner contributions begin flowing in, the quicker they start compounding. And there’s no denying the power of compound interest. But there’s a lot more to a 401(k) than monthly contributions. There are also plenty of ways to maximize the benefits of this type of retirement plan once you learn how. To avoid penalty fees, don’t withdrawn funds until the age of 59 1/2.

403(b) Plans

These are quite similar to 401(k) plans. But there are some key differences. This type of plan is for employees of public schools, other public institutions and some tax-exempt institutions.

This type of retirement plan can include faster vesting options for the funds. And catch-up contributions are allowed. The drawback with a 403(b) plan is that, while they offer mutual fund investments, other securities like stocks and REITs are not allowed.

Individual Retirement Account (IRA)

This type of retirement plan can be broken down into four major variations:

• Traditional IRA
• Roth IRA
• SEP IRA
• SIMPLE IRA.

All of these are tax-advantaged investment-based plans geared toward retirement. An IRA can hold stocks, bonds, mutual funds and ETFs. Traditional and Roth IRAs allow for investors to guide the investment decisions… which can be a benefit for a savvy investor. But this isn’t the best choice for everyone. SEP and SIMPLE IRAs don’t typically allow this.

Contributions to a traditional IRA are almost always tax-deductible. If you put $5,000 into an IRA, your taxable income decreases in equal measure. However, when it comes time to withdraw those funds, they will be taxed. But this can still be beneficial for those who expect to fall to a lower tax bracket upon retirement.

Roth IRAs are for those with a prudent eye on the future. Contributions to a Roth IRA are not tax-deductible… meaning you won’t see any of the benefits when adding funds. But – and this can be a big but – you can withdraw funds upon retirement without suffering any income tax woes.

A SEP IRA follows the same taxation rules as a traditional IRA. This one is mainly for self-employed contractors, freelancers or small-business owners. The difference here is that company employees cannot contribute to a SEP IRA. And business owners who set up a SEP IRA for their employees cannot deduct contributions. SEP IRA contributions are limited to either 25% of pay or $58,000 annually (whichever is less).

Lastly, there is the SIMPLE IRA. This one allows employee contributions. It also follows the same tax rules as a traditional IRA. But here the employer is required to make contributions. But those contributions are tax-deductible. However, the employee contribution limit is $13,500.

Salary Reduction Simplified Employee Pension (SARSEP)

This is a straightforward defined benefit plan to which employees of a small business make salary contributions. But you won’t find this one very often anymore. It was repealed under the Small Business Job Protections Act of 1996. However, employers can maintain a SARSEP plan as long as it was established before 1997.

Employees also need to have worked for the employer offering a SARSEP plan for at least three of the last five years. Contributions are limited to 25% of the employee’s salary or $58,000. And like most types of retirement plans, withdraws made before the age of 59 1/2 result in a 10% penalty fee.

Payroll Deduction IRA

Like the IRAs mentioned above, payroll deduction IRAs come in multiple varieties. There are traditional and Roth payroll deduction IRAs. In the traditional version, the money deducted from your paycheck is put into the account pre-tax. Contributions made to Roth Payroll Deduction IRAs are taxed. But this means the money can grow tax-free. And withdrawals can be made after the age of 59 1/2 without any penalty in most cases.

Payroll deduction IRAs have the same contribution limits as traditional and Roth IRAs. The only differences are that only employees can make contributions and the employer has no tax-filing requirements.

Profit-Sharing Plans

Under this type of plan, workers receive a percentage of the company’s quarterly or annual earnings. While a 401(k) or IRA allows employee contributions, a profit-sharing plan is contributed to only by the employer.

For the most part, companies that use this type of retirement plan get to decide how much they plan to allocate to each employee. And the adjustable rate can result in zero contributions being made in some years.

The contribution limit for this kind of plan is 25% of an employee’s salary and maxes out at $58,000.

Defined Benefit Plans

Also known as a pension, this used to be a popular type of retirement plan. But it has largely given way to the more employer-friendly 401(k). A defined benefit plan is an employer-sponsored retirement plan. It differs from a 401(k) in that it includes a guaranteed benefit to be paid out upon retirement. The formula used to calculate the benefit is predefined. This makes it much easier to calculate how much you’ll have in your plan once you retire.

The most common factors used to calculate the benefit are salary and years of employment. These are typically calculated with a pension factor to determine the annual payout. For instance, let’s say a company offers a pension factor of 3%. The soon-to-be retired employee’s average income for the last three years was $77,000 and they worked at the company for the last 30 years. This would mean they would receive an annual pension of $69,300 (minus federal income tax, of course).

Once retirement age is hit, the retiree can opt to receive their benefit in one of three ways:

• Lump-Sum Payment
  This is a single payment consisting of the entire value of the defined benefit plan. Once it’s paid out, that’s it. There will be no future payments made to the employee. Worth noting: This can result in an outsized tax burden.
• Single-Life Annuity
  Like we calculated above, this consists of a fixed monthly benefit for the rest of the retiree’s life.
• Qualified Joint and Survivor Annuity
  Like with a single-life annuity, the recipient will receive fixed monthly benefits for life. Upon death, a surviving spouse will continue to receive benefits for the rest of their life. In the case of the survivor, the payments are in an amount of at least 50% of the retiree’s benefits.

Money Purchase Plans

These types of retirement plans are similar to 401(k) and 403(b) plans. A money purchase plan is also a defined-contribution retirement plan. But with these, the employer is required to contribute a set percentage of an employee’s salary every year. In some cases, the employee can contribute as well. There are tax benefits for both the company offering the plan and the employee. And the required contribution percentage means that money is deposited to the account on an annual basis. If the minimum finding standard is not hit, the company will have to pay an excise tax. So there’s plenty of reason to maintain steady payments.

Employee Stock Ownership Plans (ESOP)

This type of retirement plan gives employees ownership interest in the company they work for… similarly to a profit-sharing plan. Only in this case, plan-holders are rewarded with shares of stock in a closely held company.

Companies sometimes hold the shares in a trust for the sake of safety and growth until retirement. And for the most part, a company using an ESOP ties stock distribution to vesting. This simply means that the number of shares earned is tied to the number of years of employment. Upon retirement or resignation, the company buys back the shares. And payment can either be doled out in one lump sum or via periodic payments over a set amount of time.

Upon retirement, the employee cannot take the shares of stock with them – only the cash payment.

Deferred Compensation 457 Plans

Again, these are similar to 401(k) plans. There are two varieties: 457(b) and 457(f). Those employing a 457 plan are allowed to contribute up to the elective deferral limit of $19,500. But in some cases, workers are allowed to contribute even more. And because these are tax-advantaged plans, the interest and earnings aren’t taxed until the funds are withdrawn.

The big difference here is who qualifies for a 457 plan. The 457(b) plan is typically offered to state and local government employees, as well as some nonprofit employees. The 457(f) plan is offered to select highly compensated government and nongovernment employees.

What separates this plan from others is the ability to make penalty-free withdrawals before hitting the magic 59 1/2 number. The only catch is that the employee will have to pay taxes on the money withdrawn… But that’s the case no matter when a withdrawal is made.

The Bottom Line on Different Types of Retirement Plans

The list above is just of IRS-approved types of retirement plans. The truth is that there are scores of other ways to properly plan for and enjoy retirement. A diversified portfolio of stocks and bonds can offer just as much peace of mind as an employer-sponsored program. The same goes for a healthy real estate portfolio.

Even a philatelist with a well-curated stamp collection can consider his hobby an investment plan. The most important thing is to have some sort of plan.