When it comes to planning your retirement, did you know that there are several different types of retirement accounts? From a Roth IRA to traditional IRA to the 401(k), there are several options that you can consider as you begin to plan for your golden years. In this vein, it is important to note that each type of retirement account has its unique set of potential benefits and possible drawbacks.
Understanding The Benefits Of The Roth IRA
The key benefits of the Roth IRA includes:
- Yearly contributions. — You can contribute up to $5,500 to your Roth IRA each year. However, if you are 50 years or older, then you can contribute up to $6,500 each year.
- Savings grow tax-free. — While the Roth IRA does require you to pay taxes upfront, you do get to enjoy the benefits of earning all investment income in a tax-free environment. Additionally, when it is time for you to retire, you won’t have to pay taxes on any withdrawals that you make from your Roth IRA, which means that you can enjoy an additional savings boost during your retirement years.
- No minimum distributions. — While traditional IRAs force you to take distributions when you turn 70, a Roth IRA doesn’t require minimum distributions. The latter benefit is especially important if you are planning on leaving your account to your children or grandchildren. If you do choose to leave your account to your children or grandchildren, then they can potentially enjoy tax-free distributions throughout their entire lifetime. Finally, a Roth IRA allows you to juggle your various distributions, so that you don’t accidentally find yourself in a higher tax bracket.
Understanding the Benefits of the Traditional IRA
The key benefits of the traditional IRA include:
- Yearly contributions. — Like the Roth IRA, you can contribute up to $5,500 each year ($6,500 if you are older than 50).
- Tax-free growth. — Your investments can grow tax-free inside of your traditional IRA.
- Required minimum distribution. — Unlike the Roth IRA, a traditional IRA requires you to take the designated minimum distribution. The good news is that you don’t have to take the minimum distribution until you reach the age of 70.5 years old.
Understanding The Benefits Of The 401(k)
The key benefits of the 401(k) include:
- Yearly contributions. — Unlike the Roth and traditional IRAs, the 401(k) allows for higher yearly contributions. In fact, you can typically invest more than $17,000 per year your 401(k).
- Employer matching. — Did you know that many employers offer 401(k) matching? If you want to maximize your contributions each year, then you should be sure to speak with your employer about 401(k) contributions.
The moral of the story is simple, the Roth IRA, traditional IRA, and 401(k) all offer a unique set of potential benefits. To learn more about which strategy is right for your retirement needs and goals, be sure to attend a Fortified Retirement workshop or seminar. These educational courses are designed to help you successfully plan for your future retirement. To learn more, contact a member of Fortified Retirement today and sign-up for one of their upcoming retirement seminars.
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