Regardless of if retirement is just around the corner or you have several decades left of your career, it’s never too early to start thinking about saving and investing for retirement. When the time comes you want to make sure you are set up financially and you can enjoy your newly earned free time. When it comes to investing for retirement you have options: 401(k), an IRA, Roth IRA or a regular investment account. Each has its own pros and cons.
A 401(k) is a retirement account that is offered by your employer. Often, your employer will match a percentage of your contributions and the amount you contribute each month can be taken directly out of your paycheck. 401(k)s are extremely simple to invest in and typically require little thought, other than increasing your contribution. One of the benefits of a 401(k) is that it is tax-exempt meaning that your paycheck is taxed after that money is taken out and you are not required to pay taxes on it.
An individual retirement account (IRA) is something you set up with a financial institution or financial planner that allows you to save for retirement on your own. IRAs do offer similar tax breaks to 401(k)s. IRAs are a great option if you do not have the benefits of a 401k through your employer or if you are self-employed. There are different kinds of IRAs including traditional, Roth and rollover, and each one has different guidelines. Be sure to talk with your financial planner about which one is right for you and how you can start saving for retirement today.
A Roth IRA is another retirement account that you fund post-tax. This means that you will not be able to include your retirement contributions on your tax return. This is ideally for those who expect their tax rate to be high during retirement.
You can also invest in your retirement through a regular investment account. The one downfall to this is you won’t receive the same tax benefits you would through the first two options. However, 401(k) and IRA plans do have limits on the amount of money you can contribute so if you’re looking to invest a lot in a short period of time, a regular investment account may be a better option for you.
If you haven’t started thinking about retirement yet or you need help making changes to your existing retirement plan contact Care Financial. Our team of expert financial planners is ready to help you with your retirement investments so you can enjoy your retirement worry-free and with financial security. It’s never too early to start thinking about your retirement so give us a call at 251-633-7122 today!