In the United States today, there are two major kinds of retirement plans. The first is the 401k, which is an employer-sponsored plan and the second is the IRA, which is an individual retirement plan. Both types of plans allow people to save money for use after they retire from the workforce, but that’s about as far as it goes for similarities. When it comes to the 401k vs IRA, they both have pros and cons, so it’s really going to come down to your retirement goals when choosing which plan is right for you. Of course, if your employer does not offer a 401k, you could be limited to an IRA, but in the event that you have a choice between the … [Read more...]
Traditional vs Roth 401k – Which One Is Better?
Even though they may appear similar, the amount of money you can effectively contribute to a traditional vs Roth 401k can be quite different. The IRS states that you are allowed to contribute up to $17,500 to one account or the other each year. But when you take a closer look and consider how taxes influence those contributions, you’ll discover that there are benefits in using the Roth over the traditional. … [Read more...]
Comparing a Pension vs 401k – What Are the Differences?
One of the biggest changes to hit retirement planning in the last 30 years has been the shift of defined benefit pension plans to 401k employer sponsored plans. Basically the difference between the pension vs 401k was that it shifted the responsibility of saving and planning for retirement from the employer to the employee. This transition started around the 1980’s after 401k plans were created and started gaining more popularity. As you can guess, this was a huge cost save for employers because they no longer had to administer and maintain the plans of their employees and retirees. Despite whether you think one is better than the other, … [Read more...]
Will 401k or IRA Contributions Make One Million Dollars First?
When you’re saving for retirement, one of the most important factors to consider is which type of account will help you reach your retirement goals the fastest. In order to figure this out among the IRA vs 401k debate, you’ll need to decide whether using IRA contributions or 401k contributions will help you build your retirement nest egg the quickest. IRA Contributions or 401k Contributions? To give ourselves a goal, let’s set our goal at one million dollars and see which method gets us there first. Although everyone’s retirement goals are different, one million dollars represents a physiological threshold of “being ready to … [Read more...]
401k Advantages and Disadvantages – The Most Important Things You Need to Know
When your employer invites you to take part in their company-sponsored 401k, it can be a huge advantage to your fortune building potential. However, everyone’s financial situation is just a little bit different. So there could also be some variables about the plan that aren’t as well suited for your specific and unique needs. Below are several 401k advantages and disadvantages that you’ll want to consider before you get started and invest your first dollar. (By the way, if you’d like to know more about how a 401k works in more detail, follow the link to read further.) 401k Advantages: It’s your choice. One of the … [Read more...]