Understanding 401ks

The 411 on the 401k

How to understand and select the best IRA or 401k

Those planning for retirement today face rising inflation and underperforming portfolios. Are you confident that your 401k will sustain you and your family through retirement?

Choosing Between a 410k, Traditional IRA, or Roth IRA

Consider the following factors when choosing your ideal retirement plan:

  • Who Sets up the Plan: Employers or sole proprietors set up 401ks. Individuals set up traditional and Roth IRAs.
  • Tax Benefits: Capital gains, dividends, and interests incur zero tax liability for all three plans.
  • Subjected Taxes: Contributions are normally pre-tax for 401k and traditional IRAs, and post-tax for Roth IRAs. Qualified distributions are not taxable through Roth IRAs. When contributions are pre-tax, distributions are taxed as ordinary income for both other plans.
  • Matching Contributions: These are available with 401ks, as IRAs are not set up by employers.
  • Contribution Limits: For 401ks, $17,500 per year before age 50, and $23,000 per year when 50 and above. For both IRA types, $5,500 before age 50 and $6,500 per year at 50 and above.
  • Distributions: For 401ks and traditional IRAs, distributions can start at 59 ½ or if the owner becomes disabled. Roth IRAs can be taken 59 ½ as long as they were established 5 years prior.

Retirement Guidance from a Certified Financial Planner®

Your retirement account type will affect whether you and your family can maintain your lifestyle post-career. Do your research, and consult a Certified Financial Planner® to help you choose the plan that best fits your financial needs.

Our financial planners have decades of experience helping couples achieve peace of mind about their post-career finances.

To learn more about how to financially plan for other life pivot points, click the links below:

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