The article is about Retirement Savings Advice for Americans. Americans have many ways that they can begin saving for retirement, and sometimes, their employers will even help them.
They can also open their own retirement accounts if they are not currently involved in a workplace where the employer-matched retirement accounts are available to them.
These accounts will give them a chance to begin saving early and watch their money grow over the long term, and this is the best way for people to have enough money to live out a long retirement in financial comfort.
The Traditional 401(k) Retirement Plan
One type of retirement plan that people can often obtain through their employers is the 401(k) plan. This account has many tax advantages because it will be funded with pre-tax dollars. This means that the accountholder’s tax burden will be lower because the money for the 401(k) will be withdrawn before the employer will determine how much the employee needs to pay in taxes. The proceeds that these accounts earn will be tax-deferred and the accountholders will not have to pay any taxes until they begin to withdraw the money.
The 401(k) gives people’s savings a chance to grow significantly because the money is being compounded over several years as it is not being taxed. Employers often match the amount of money that their employees contribute toward these accounts, so they are even more beneficial to employees. The employees can decide on their level of risk by determining where the money will be invested. If they change jobs, they can take their 401(k) plans with them.
The Roth 401(k) Retirement Plan
Another type of 401(k) plan people can obtain from their employers is the Roth 401(k) retirement plan. One difference between this and the traditional plan is that the Roth 401(k) is funded with after-tax dollars. The money in these accounts will still be allowed to grow without the accountholders needing to pay taxes on the proceeds. After they begin withdrawing the money at age 59 ½ or beyond, they will not have to pay any income taxes as they would with the traditional 401(k) plan.
The Roth 401(k) offers people a chance to contribute more money toward their accounts than they can to a traditional 401(k). This account also allows the employer to match the funds the employee deposits.
Individual Retirement Account (IRA)
The IRA is a retirement account that individuals can open and make contributions to over the years with different sources of income. The sources can come from several areas and does not necessarily have to come from a job. For example, alimony payments or money from one’s current spouse can be used to fund these accounts. They are also great for those who own their own businesses.
The money in these accounts is tax-deductible and will lower the accountholder’s tax burden like the traditional 401(k). The traditional IRA will not be taxed until distributions are taken between ages 59 ½ and 70 ½.