One thing that often surprises people when they move into a new job is how different retirement savings options can be, especially if they’re moving from a for-profit to a nonprofit entity, or vice versa.

But don’t be overly concerned about the different labels for the various 401(k)’s. Across the different plans, the basic premise is the same: you build your retirement savings by putting part of every paycheck into a retirement account on a pre-tax basis. The money grows while in the account and is tax deferred. Later, when you retire, you can take the money out and claim the distribution as income. But you have to make the decision to make the investment and you have to understand how each option works.

Here’s a little guidance on how the three most common plans work and differ:

401(k): Probably the most widely known plan, 401(k)s are offered to employees of for-profit entities. The contribution limits for 2012 are $17,000 if you are younger than age 50 and $22,500 if you are 50 or older.

Sometimes employers will offer a contribution “match” to encourage saving for retirement and as an additional recruiting and retention perk. Essentially free money, a match is one of the best and easiest ways to grow your retirement savings.

403(b): A slightly lesser known plan, 403(b)s are offered to employees of nonprofit institutions and public education employers. If you are a teacher, chances are this is the plan you have. The annual contribution limits are the same as the 401(k) but, after 15 years of service, additional employee contributions can be made to the plan (big bonus). In addition, most schools offer participants a choice of 403(b) providers to choose from giving you more options for growing your money.

457: The least known of the three, 457s are offered by state and local governments and some tax-exempt institutions. The state of New York’s Deferred Compensation is a 457 plan. While the contribution limits are the same as the 401(k) plans, this type of plan often has a special catch-up feature that lets you add additional funds with no penalty three years prior to normal retirement age stated in the plan. If you are close to that age and want to save more money on a pre-tax basis, this is an option definitely worth asking about.

Another unique feature of some 457 plans is that there is no coordination of contribution limits. This means that if your employer offers both a 401(k) and 457, the maximum amount contributed can be made to both.

While your career path may take a few unexpected turns, it inevitably ends with retirement. Understanding and taking advantage of the various retirement plan options offered to you now will go a long way toward ensuring you reach that end with sufficient funds to enjoy your retirement without worry.

Given that traditional pensions are the exception and not the norm, your 401k should be your primary concern as far as future finances go. Now if you’re cringing because you don’t have a 401k or have been neglecting yours, take heart. There’s good news to be had.

Recent changes to 401k limits now make it possible to begin building up this retirement base in a more meaningful way than was ever possible in the past. Or, in instances where you’ve been short-changing your account, the new limits will help you make up some of the ground lost. Contribution limits have been ratcheted up to keep closer pace with inflation and will be specifically keyed to inflation beginning in 2013.

For individuals age 50 and over who have put off retirement planning, the good news continues in the form of a catch-up limit. If you are 50 or over by year’s end, you can make an additional catch-up contribution to your 401k on a pre-tax basis. For 2012, the catch-up limit is $5,500. Like standard contributions, catch-ups will be indexed to inflation in 2013 and you are free to make additional catch-up contributions on annual basis (or until you max the option out at $22,500) so as to improve your financial status by the time you reach retirement.

Something that all 401k holders should try to take advantage of regardless of age or the size of their 401k is an employer match. While not all companies offer match programs, it’s of the utmost importance that you find out if a program is available. While the structure of programs can vary dramatically they all offer the same thing: free money for your retirement. Not taking advantage of this option or simply failing to ask if it exists is one of the most short-sighted things you could possibly do. If you do nothing else in the new year, besides take advantage of a match, you will have made a significant improvement in your future financial outlook. Get on it.

While 2011 will no doubt go down as a less-than-stellar financial year, the positives for the economy in 2012 appear to outweigh the negatives for the 2012 economy. With that in mind, I wish you a very happy and prosperous new year and urge you to stay focused on the present and always with an eye to the future, not the past.

Jason MacGregor

For many of us, the experience of signing up for our 401(k) is a bit like ordering off the lunch menu at a Chinese restaurant. You’re handed a set menu with very little choice; sometimes the offerings are appealing, sometimes they’re not, and sometimes you’re not even sure what it is you’re looking at. But what’s really frustrating is that you know there’s something better cooking in the kitchen

When it comes to 401(k)s, the good news is that many employers have responded to consumer frustration through the addition of a self-directed option. Sometimes referred to as a brokerage or mutual fund window, self-directed accounts allow you to buy any mutual or exchanged-traded fund (ETF), and sometimes even individual stocks and bonds, that catch your fancy.

Self-directed funds allow you to go “off menu” and pursue investments that are in line with your strategy. From targeting select asset classes or sectors to keeping internal plan costs low, self-directed funds fill the bill in the way tradition 401(k) accounts don’t.

However, not everyone agrees that more choice is, shall we say, “more” better. The truth is, the less-than-savvy investor can do more harm than good to themselves by buying stocks that go way down or bankrupt. Or, in their enthusiasm for choice, investors may end up trading so much that the commissions charged outweigh any gains. Just like at a restaurant, it’s really only worth going off-menu if you fully understand what you’re getting.

Some employers, including local companies, have found a way to open up the buffet while also limiting potential harm. Glens Falls Hospital, for example, allows employees to put money into a self-directed account but limits them to just mutual funds. While this may sound limiting at first blush, the truth is the option increases the pool of investment choices from a mere 25 or so to a massive 2,000 or more.

In another protective approach, New York state employees who participate in the Deferred Compensation 457 Plan can put money into a self-directed account and invest in both funds and low-cost ETF’s. But in this plan the state caps self-directed investments to 50 percent of the total account balance. That way if an employee makes a bad investment choice, they might feel sick but they won’t be sunk.

Interestingly, many 401(k)-plan participants aren’t aware of self-directed options even when they’re offered where they work. I attribute that to the fact that most of us have gotten used to the limited menu approach. Let me be the first to encourage you to order off the menu. Don’t just take what’s handed to you. Ask your employer to explain all your options and if they’re not to your liking, ask for what you want. There’s a good chance that expanding your investment options is as easy as duck soup. And if you have trouble reading the menu, reach out to a professional who can translate.

Jason MacGregor, principal of Minich MacGregor Wealth Management in Saratoga Springs, is a fee-only advisor who provides investment advice to individual company retirement plan participants. He can be reached at 499-4565, jason@mm wealth.com, or Twitter @mmwealth.