In this video, I will discuss some key differences with contributions into an employer sponsored plan versus having your own Individual retirement account (or IRA).
Also, what are some key differences between a Traditional and the Roth. Both allow your savings to grow tax deferred until you begin taking withdrawals. However, the Roth provides tax-free distributions after meeting certain requirements.
In a perfect scenario, perhaps you can take advantage of both because of the ability to have tax deductions now, plus receive tax free money later!!
Please enjoy….(read more)

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When it comes to saving for retirement, two of the most popular options are 401Ks and IRAs. Within each type of account, there are also traditional and Roth options. It can be confusing to navigate all the choices, so here’s a breakdown of each type of account and what sets them apart.

401K vs IRA

A 401K is a retirement savings plan that’s usually offered by an employer. Employees can contribute a portion of their salary to the plan, and sometimes employers will match those contributions up to a certain amount. One benefit of a 401K is that the contributions made are tax-deductible, which can reduce your taxable income for the year. However, there are contribution limits and penalties for early withdrawals before age 59 ½.

An IRA, or individual retirement account, is an account that you can set up on your own through a bank, brokerage firm, or other financial institution. Like a 401K, the contributions made to an IRA are tax-deductible in some cases. The contribution limits and penalties are similar to those of a 401K.

So, what are the main differences between a 401K and an IRA? One major difference is the contribution limit. In 2021, the contribution limit for a 401K is $19,500, while the contribution limit for an IRA is $6,000. Additionally, with a 401K, your employer may offer a matching contribution, which can help your savings grow even faster.

Traditional vs Roth

Once you’ve decided whether to go with a 401K or IRA, you’ll also need to choose between a traditional and a Roth account. The main difference between these two types of accounts is when you pay taxes on the money that you’re saving.

With a traditional account, you’ll make contributions with pre-tax dollars, which means that you’ll pay taxes on the money when you withdraw it in retirement. This can be beneficial if you think that you’ll be in a lower tax bracket in retirement than you are now.

With a Roth account, you’ll make contributions with after-tax dollars, which means that you won’t have to pay taxes on the money when you withdraw it in retirement. This can be beneficial if you think that you’ll be in a higher tax bracket in retirement than you are now.

Which account is right for you?

Deciding between a 401K or an IRA, as well as a traditional or Roth account, can depend on several factors, such as your income, tax bracket, and retirement goals. It’s always a good idea to consult with a financial advisor to make the best decision for your individual needs.

In general, a 401K can be a good option if it’s available to you, especially if your employer offers a matching contribution. However, an IRA can be a good option if you’re self-employed or if you want more control over your investment choices.

When it comes to deciding between a traditional and a Roth account, it can depend on your current tax bracket and your expected tax bracket in retirement. If you’re in a lower tax bracket now and expect to be in a higher one in retirement, a Roth account might be a better choice. If you’re in a higher tax bracket now and expect to be in a lower one in retirement, a traditional account might be a better choice.

Ultimately, the most important thing is to start saving for retirement as early as possible and to take advantage of any employer matching contributions that might be available to you. Whether you go with a 401K or an IRA, and whether you choose a traditional or a Roth account, the key is to save consistently and to make your retirement savings a priority.