The Difference between a IRA and 401k
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Chances are when it comes to your money you may either have an IRA or 401K.
Regardless of which one you have the question that usually sticks out in most
people’s minds is; what’s the difference between the two? Taking that a step
further one may also wonder which one is better for my financial success. Thus,
let’s examine the differences between the IRA and a 401K, because you may be
surprised to find out which one better suits you or you may decide to have both.
The important thing to remember with IRA’s is that they’re really all about you.
AN IRA account is funded by your money, regardless of what the source is. The
real deal with an IRA is that your employer has nothing to do with it. It’s all
your money and there are two main types of IRA’s; a traditional and a Roth.
Typically the one that most people prefer is the ROTH IRA because of its
contribution benefits, and hassle free worries. Also, one thing that’s important
to note about a ROTH IRA is that if you are in the position to save $500.00 on a
monthly bases for about 10 to 11 years, you can actually save a cool million
through a ROTH IRA.
Next up let’s talk about the 401K. A 401K account has often been described as a
long term financial plan through one’s employer that an employee should
absolutely take advantage of. Typically with a 401K you have X amount of dollars
or a certain percentage of your paycheck that will go into your 401K account.
One of the huge benefits about the 401K is that your employer can make matching
contributions that will go towards your 401K that will go above and beyond the
maximum 15% of your check that can be put into your 401K account. Now, when I
say 15% I am only referring to employees that make a certain amount of money per
year, because if you are in a higher salary range you can only contribute
$10,000 of your salary towards your 401K.
The truth of all this is that it never hurts to have both. A 401K account and an
IRA (preferably a ROTH IRA) can really help build a solid financial future for
you, your family, and for emergencies. Thus, by investing in these long term
accounts, you can be sure that you will have present and future success, and a
safety net of money.