Saving for retirement is a very crucial and necessary step to take in your life. Although it is not often discussed in your formative years, it’s a decision that we will all have to make at one point or another, as pensions and other forms of retirement aid become increasingly non-existent. When we talk about retirement plans, there are usually two popular choices that come to everyone’s mind: 401(k) and IRA. Don’t know too much about either? Well, we’ll unravel their complexities below:
What is an IRA, and should you invest in one?
An IRA, or Individual Retirement Account, gives anyone the opportunity to contribute to their retirement fun, even without a formalized W-2 employer— as long as they are under the age of 70. Not too difficult of a requirement for most to meet, no? If it’s offered through your company, the business you call home needs to have less than 100 employees to qualify.
IRA accounts are held by banks or brokerages and allow holders to own many different assets within the account, including stocks, bonds, CDs, and even real estate. There are several different types of IRAs—Traditional, Roth, Spousal, or Rollover— and these accounts are generally tax-deductible. Earnings and returns can grow tax-free, and you pay tax on the withdrawals during your retirement years. However, if you have a Roth IRA, your contributions will be made after-tax dollars, making all withdrawals free during retirement. Pretty sweet deal, if you ask us!
Or, is a 401(k) better for your personal finance goals?
A 401(k), on the other hand, is the type of retirement savings you may have heard discussed with even more frequency. A 401(k) is a tax-deferred retirement savings account offered by numerous employers around the United States. Employees contribute money to their accounts, and employers can choose to match a certain percentage of that contribution. Keep in mind that many companies have vesting requirements for matching contributions—but all good things come with time and effort!
The amount you contribute to your 401(k), percentage or dollar, is taken out of your check before it reaches your hand or bank account –just like social security, health benefits, or taxes. Just think of that money as spoken for –and it won’t hurt too much! When you enroll in your plan of choice, you will have to decide where you’d like to invest your dollars, whether it’d be mutual funds or exchange-traded funds. Like an IRA, you have ample options available for your future!
Even though Hollow Tree Park Apartments in Houston, Texas provides you with all of the comfort, convenience, and entertainment you could possibly desire, it’s unfortunate to face circumstances that require you to stay at home. We encourage our residents to keep the fun going from your own apartment with our suggestions, tips, and more!