Joan's Tips:
Advantages of 401K Plans and IRAs
- Tax advantages: your money grows tax-free
- Contributions through payroll deduction
- Investment options: stock mutual funds, bond mutual funds, balanced funds, stable value funds, and money market funds
401K
- Free money if your employer offers matching funds
- No income limits
- Higher dollar limits for contributions: most employees can contribute up to $17,000; those 50+ can contribute up to $22,500
- Loan programs: borrow from your 401K account
- Rollovers if you leave the company
- Investment choices
IRA Account
- Consider if no 401K plan is available, if your employer does not offer a match for 401K funds, or if you have maxed out your 401K match.
- No matching funds
- Lower annual contribution limits: maximum $5,000 up to age 50, $6,000 for those 50+
- More investing options
- Ease of moving money to other IRA accounts
Roth versus Traditional IRA
- Current income and tax bracket may limit your options
- Anticipated tax bracket at retirement
- Your current age
- Withdrawal timetable
