Using only a 401(k) for retirement might be a costly mistake. The 401(k) is popular for good reasons -- tax deferrals, automatic savings, employer matches, low fees, and guidance from the plan administrator are all attractive features.

Still, there are some drawbacks to any type of financial account, and a balanced approach can yield benefits. You might want to consider some alternatives to improve flexibility and control over your retirement fund.

1. Traditional IRA

Traditional IRAs are similar to 401(k) accounts. Both allow people to deduct earned income from their taxes and defer the income tax payable on those earnings until retirement.

The IRA differs from your 401(k) in a few key ways. The main drawback of the IRA relative to a 401(k) is contribution limits. Many employers offer contribution matches in their benefits packages, meaning that they'll put some extra cash into your 401(k) based on how much you save. Annual tax deferrals in those accounts can be as high as $19,500. IRAs are individual accounts and are therefore not eligible to receive employer matches. They also have much lower deferral limits -- you can deduct only $6,000 worth of contributions each year (up to $7,000 if you're 50 or older).

Person holding a piggy bank thinking about retirement.

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IRAs provide more control over your retirement investment. 401(k) accounts are limited to the investment options offered by the plan provider. Most plans offer an ample set of mutual funds and ETFs that can accommodate any retirement goal. Still, you're subject to whatever fees are charged by the provider, thousands of mutual funds and ETFs aren't offered in the plan, and you usually can't purchase individual stocks.

You're free to choose any custodian for your IRA, and the account can hold any security available on that brokerage platform. There are even self-directed IRAs designed for assets outside the normal realm of stocks, bonds, mutual funds, and ETFs. This provides more control over fees and portfolio allocation relative to a 401(k), which is important for many retirees.

2. Roth IRA

The Roth IRA has many of the same features as the traditional IRA but with a completely different approach to taxation. Roth contributions aren't tax deferred, so they won't reduce what you owe to the IRS. However, the proceeds from your investments aren't taxed if you make qualifying withdrawals after age 59 1/2. Distributions from a 401(k) or traditional IRA are subject to income tax in retirement. This makes the Roth ideal for high-growth investments that would otherwise incur high income tax or capital gains tax in other accounts.

Roth IRAs also offer more access to the money that you contribute to the account. Contributions to your 401(k) and traditional IRA are functionally locked into those accounts. There are early-withdrawal exemptions for financial hardship and first-time home purchases, but you generally must pay income taxes and a 10% penalty on any withdrawals made from those accounts. Roths are different. You can withdraw up to the amount you've contributed without incurring taxes or penalties.

Unfortunately, not everyone can take advantage of Roth IRAs. The amount you can contribute is phased out for single people with incomes between $125,000 and $140,000.
For joint filers, that range is $198,000 to $208,000. If you earn above those upper limits, you can't put anything into a Roth.

3. Health savings account

Health savings accounts are valuable tools that combine some qualities from 401(k) plans and Roths. HSA contributions are tax deductible, just like a 401(k) or traditional IRA. However, withdrawals to cover qualifying medical expenses can be made tax-free. To be eligible to use an HSA, you must have a qualifying high-deductible plan.

You can use HSA funds at any time. Contributions can be carried forward indefinitely, and you can invest those funds for growth. With the average person incurring more than $400,000 in medical expenses in retirement, a tax-free, accessible pool of money can transform your retirement plan.

Many employers offer HSAs, but they can also be opened privately by individuals. Single people can contribute up to $3,600 annually, and families can double that. People over age 55 can contribute an additional $1,000. Funds withdrawn for nonqualifying expenses are available, but they'll come with a 20% penalty plus taxes. Plan accordingly.

Ultimately, the best account for you depends on personal circumstances. For most people it's beneficial to use different account types to unlock the benefits of each. Consider these other options before putting all your eggs in the 401(k) basket.