Whether you are nearing retirement or just starting to plan, knowing the different types of retirement plans out there can help you strategize. There’s a lot to consider when it comes to retirement and at Trajan Wealth we want to set you up for retirement success! So, we’ve compiled a few of the best retirement accounts so you can see key options all in one place.
Types of Retirement Plans
401(k) – As of 2021, if you’re under 50 years old, this tax-advantaged workplace plan allows you to contribute up to $19,500 a year. (50+ good news: you can put in up to $26,000 yearly!). Currently, total contribution limits are $58,000 and $64,500, respectively.
The best part? Your employer might match a certain percentage of what you’re contributing. That means even more money going towards your retirement!
IRA (Individual Retirement Account) – This investment account is a great option if your employer doesn’t offer a 401(k). As of 2021, you can contribute up to $6,000 a year if you’re under 50. (Once you hit 50, that number increases to $7,000)
The best part? You don’t have to pay annual taxes on investment gains. Put away those dollars and watch them grow.
Roth IRA – Roth IRA contributions are made with post-tax dollars (but that money is not taxed again!).
The best part? You can actually contribute to both a traditional and Roth IRA, as long as your combined contributions don’t exceed $6,000!
Roth 401(k) – This option combines the advantages of both a Roth IRA and a 401(k). A Roth 401(k) is offered through the workplace, with post-tax contributions. As long as you remain in the plan for a minimum of 5 years, your contributions (and subsequent earnings) aren’t taxed again.
The best part? Contributions limits are the same as a 401(k) but there’s no income limit!
Pensions vs 401(k)
Offered through an employer, a pension guarantees a consistent monthly income after retirement. In this option, the investment risk is solely on the employer. As we mentioned before, a 401(k) puts the risk on the employee. But the employee has more control over where the money is being invested.
It’s important to note that while pensions are relatively common in the public sector, they’re rare in the private one. These days, the 401(k) has replaced the pension. Talk to your employer to see what options are available to you!
Trajan Wealth Can Help With Your Retirement Plans
Deciding which type of retirement plan is right for you will help set the foundation for your future. Talk to your employer about the available options and consult with a financial advisor who will offer sound and fair advice.
At Trajan Wealth, we’re happy to be that advisor for you. When you’re ready to talk retirement, contact us. We’re always here to answer your questions and guide you along the way!