Choose The Right Retirement Plan! Here Are Your Best Options
After entering the job market, the only thing you hear is the importance of saving for retirement. But, even with such a long time to prepare, when the time for retirement comes around, you’re still short on funds.
According to an Insured Retirement Institute survey, more than 50% of workers in the US aged between 40 and 73 have under $50,000 in retirement savings. On top of that, about 6 in 10 Americans are unable to save even 10% of their income.
You can save for your retirement in a couple of ways, depending upon your situation. The most popular options include an individual retirement account or employer-sponsored plan.
Let’s take a deeper dive.
1. Roth IRA
Since your Roth IRA contributions are made on an after-tax basis, you won’t have taxes deducted when you withdraw your savings. The drawback comes in terms of income limits. If you are married, filing jointly, and make under $198,000 a year, you can contribute a maximum of $6000 to your Roth IRA. The same limit is set for singles making under $125,000.
When you grow older and make more money, you might fail to qualify for the Roth IRA so experts advise setting up an account when you’re young. However, if you see yourself making less in the future for some reason, you might want to hold off on that. With this account, you have the option to withdraw your contributions penalty and tax-free whenever you want.
This is an employer-sponsored plan that lowers your annual taxable income. Contributions are automatically deducted from your paycheck without tax. Your employer contributes the same amount as you to garner substantial wealth for retirement. Tax deduction depends on the tax bracket at the time of withdrawal. According to finance expert Chris Hogan, you can take advantage of the 401(k) by saving up to $19,500 this year.
3. Traditional IRA
If you don’t have a 401(k) or Roth IRA, the traditional IRA is a budding choice. Contributions are made on an after-tax basis so you won’t have to incur deductions upon withdrawal. You can use this account to even roll over whatever 401(k) balance you gained from past employers.
Life is very short and before you know it, you’ll hit retirement age. After spending a life of hard work, the last thing you want is for your golden years to be uncomfortable. Now’s the time to do all you can to accumulate enough wealth to spend a trouble-free retirement life!
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