Where to Stash Your Retirement Cash

Most people realize that they need to save money for retirement. Unfortunately, though, a lot of people are unsure of where they should be saving that money. There are actually quite a few different options to choose from, such as money market accounts and standard savings accounts, but most financial experts agree that the two best options are 401(k)s and IRAs. These savings options can cut taxes and increase the amount of money that actually makes it to savings.

As mentioned, both options are beneficial. Thus, which one you should choose really depends on your personal needs and savings goals. While you’d likely fare just fine with either choice, it’s always smart to talk to a financial advisor to determine the best savings option for you specifically.

401(k)s

A 401(k) plan is the way to go if you don’t mind a limit on how much you can deposit or if the limits are within your planned deposits. As of this year, you can put up to $18,000 in your 401(k) without paying a cent in taxes, and if you’re 50 or older, you can even add on an extra $6000 without getting taxed! Plus, in most cases, your employer will be willing to match your donation amount, which can really get the money flowing!

Another great benefit of a 401(k) is that you’ll likely be provided with professional advice and management of your account. That’s because employers are required by law to be honest and open about fees and investment choices, and most don’t want to take any chances of getting in trouble by mismanaging or otherwise being misleading about your 401(k).

401(k) funds are also protected in the event of litigation or bankruptcy , which offers an extra layer of protection to your retirement fund.

So, if you want these benefits, a 401(k) may be for you! However, if you don’t like lots of limits and want more investment and growth options, you may do better to choose an IRA.

IRAs

Like 401(k)s, IRAs give you an opportunity to stash away money for retirement without paying taxes on it. However, there are some restrictions in place, including income limits. Single adults who make above $61,000 each year, for example, cannot deduct contributions to their IRAs tax free. However, with some types of IRAs, such as Roth IRAs, you do have the option of withdrawing money tax-free, so it’s kind of a give and take.

Even with this restriction, many people still find IRAs to feel less restrictive than 401(k) plans. However, with an IRA, you won’t enjoy the same kind of protection you would with a 401(k) and you’ll be the one responsible for figuring out the best way to invest with your IRA or hiring and paying a professional to do it for you since workplaces typically don’t offer help with IRA management.

Monday, November 2, 2015