Putting money aside for retirement is an important step for any wage earner. Pension plans are going the way of the dinosaur, and the only option other than Social Security is if you save your own money in a tax-advantaged retirement account, such as a 401(K) plan at your place of employment.

There are many options available for retirement accounts, both employer sponsored and through your own brokerage account. At your job, your employer has an option to offer a 401(K) retirement account, which lets you put pre-tax wages into a retirement investment account. Not all employers offer this, and if you can’t take advantage of a 401K, you can use a traditional IRA, or Individual Retirement Account.

Don’t get confused, as there is no such account as a 401k IRA – they are two separate types of accounts. However, depending on how much you earned, and your tax filing status, you may be able to invest in both a 401k and an IRA. Once you earn over a certain limit, you can no longer qualify for the IRA.

The amount you invest in an IRA is tax deductible off your federal income taxes. However, the maximum you can invest each year is much less than a 401K, so if you have a 401K option at work, that is probably the better of the two if you want to stash as much money as possible.

Both types of accounts have specific limits. For the tax year 2010, the maximum you can invest in a 401K is decided by your employer, as a percentage of your income, but not more than $16,500, or $22,500 if you are over 50 years of age. For a traditional IRA, the maximum investment is $5,000, or $6,000 if you are over 50 years old. This is also limited to the maximum amount you earned in 2010. (You can learn more about retirement account limits at the U.S. Internal Revenue Service website.)

You can see that there is a big difference in how much you can put away for your retirement. If you are able to put aside the maximum amount of your wages, you should discuss it with a tax advisor or your employer’s benefits manager, to see what your individual allowances are. Putting as much aside as you can may be a good idea. But remember, you will also need to know what the investments are that you’re investing in, not just how much money you can put aside.

Remember also that you can always invest as much money as you want in other accounts – they are just not tax-deferred or otherwise tax advantaged accounts. If you put money into a self-directed brokerage account, you will pay taxes on the capital gains earned in that account. But you also have options such as tax-free municipal bonds, where you can invest with lower tax impacts. The bottom line is, don’t think you are only limited to your 401K and IRA options for financial security in retirement. Work with a financial advisory to consider all of your options, once you’re reached your retirement account limits.