When you start a new job and get the notification that you qualify to sign up for a 401k it can be a little confusing. There are different allocations and types of plans. As well, if you leave a company or are self employed there are other types of accounts pertaining to retirement.
The amounts and regulation behind each account can sometimes change. These are a benefit the government allows to give people a tax break on their retirement savings.
Here is your brief summary of the different types of retirement plans so you can have some sense of what you are doing:
401(k): A 401k is often offered by companies and takes a certain percentage of every paycheck and puts it in a retirement account. The great thing is they do this before they take taxes out so you are actually saving on taxes! For this reason the government usually limits how much you can contribute per year. Most employers will also contribute towards your 401k. Every employer is different with some matching what you put in and others putting a certain dollar amount or percentage.
403(b): Like a 401k but if you work at a non-profit or are a teacher
As well if you have your own business you can set up a Solo 401k and make contributions as an employee and an employer.
IRA: You can contribute to an IRA whether you are also contributing to your work 401k or not. The amount you can contribute pre-tax per year is way less (currently $5500).
Roth IRA - Puts money in an account after taxes. When you turn 59 and 1/2 you can take the money out of the account without taxes. You also cannot make more than $131,000 a year or $193,000 if you are married and filing jointly.
SEP IRA - Simplified Employee Pension IRA- Usually used by small businesses or people that are self employed. You can contribute up to 25% of your income with a $53,000 limit. If you are a small business owner and you have employees you must contribute to their account
NO MATTER WHAT THE MOST IMPORTANT THING IS TO BE SAVING TOWARDS RETIREMENT
This can all be a little overwhelming but you can always hire a Financial Advisor to help. They usually just save a 1% fee per year and help set up accounts and give you advise on how the money in your account should be allocated.