Many people work their entire lives with retirement as the goal. After decades of full-time work, it’s natural to want to be able to kick back, relax and spend time with your family during your golden years. The best way to ensure a comfortable retirement is to plan for it financially.
Choosing the right retirement plan can make all the difference. If you’ve saved and invested wisely over time, you can rest easy knowing that you’ll have everything you need in the twilight of your life.
This article will offer some tips on choosing the right retirement plan for you.
401(k)
A 401(k) retirement account is an employee-sponsored retirement plan. If your employer offers it, they will deduct a portion of your paycheck each pay period before taxes and put it into a 401(k). This will lower your taxable income. Despite this, you will be taxed when you withdraw the money during your retirement.
If you’re under 50 years old in the year 2021, the IRS allows you to contribute up to $19,500 to your 401(k) account and $26,000 if you’re over the age of 50. At age 72, you’ll have to begin taking money out of your 401(k), as this is known as required income distribution. You may face monetary penalties if you take money out of a 401(k) before the age of 59.
Roth IRA
The main perk of a Roth IRA (individual retirement account) is that you won’t be taxed when you withdraw the money during retirement. This is because the money that you contribute will already have been taxed as income. Choosing the right retirement plan means assessing where you are in life financially and how old you are.
For example, if you’re a younger investor, a Roth IRA is an ideal retirement plan. This is because there are yearly contribution limits, and the older you get and the more money you make, the less you’ll be able to contribute. If you make less than $125,000 and are single or if you make less than $198,000 and are married and filing jointly, you can contribute up to $6,000 to your Roth IRA each year. The contribution limit rises to $7,000 per year if you’re over the age of 50.
Traditional IRA
When shopping for a retirement plan, don’t sleep on the traditional IRA. If your employer doesn’t offer a 401(k) or if you’re not eligible for a Roth IRA, then a traditional IRA is a viable alternative. Traditional IRAs are only available to those with an earned income, and contributions are made before taxes.
This means that you’ll be taxed on the money you withdraw during retirement. In 2021, you can put up to $6,000 into your IRA if you’re under 50 and $7,000 if you’re 50 or older. It’s worth noting that you’ll receive a tax deduction if you contribute money to your IRA during the year, so keep that in mind when considering a traditional IRA.
Call to discuss your retirement plan today
Shopping for a retirement plan and choosing the right retirement plan aren’t always simple tasks. For assistance with your retirement plan, call us at the Fiduciary Advisors, LTD. We have 30 years of experience helping our customers with their retirement plans, and we’re dedicated to making sure you can retire comfortably.