Sure, a 401(k) is an excellent tool for getting started with investing and saving for retirement – but it may not be enough on its own to sustain you throughout your retirement years. You might consider adding an individual retirement account (IRA) to the mix.
You’ve got two choices: a traditional IRA or Roth IRA. Each has benefits and drawbacks, and the overwhelming amount of available information means deciding which is better for you can be tricky. At The Mutual Fund Store®, we cut through the noise to closely examine your situation and help you make an informed decision. Here are some of the factors we’ll discuss with you:
For a traditional individual retirement account, contributions can be tax-deductible and earnings grow tax-deferred; withdrawals are taxable when distributed. Meanwhile, contributions to a Roth individual retirement account are not deductible, but this investment vehicle offers the potential for tax-free earnings and, typically, tax-free withdrawals.
You have to be younger than 70 1/2 at the end of the tax year (Dec. 31) to contribute to a traditional IRA, but you can contribute to a Roth IRA and make rollover contributions to either type of IRA regardless of your age.
If your income exceeds a certain limit, you may not be able to contribute to a Roth IRA, or you may only be eligible for reduced contributions. You can contribute to a traditional IRA regardless of your income, but your contributions will be limited to the lesser of $5,500 or your earned income for the year. Whether those contributions are deductible depends on your income and other factors.