Retirement Accounts
There are two primary types of retirement accounts to consider: IRAs and 401Ks. Both are popular tax-advantaged investment options. A 401K is a plan sponsored by an employer that allows employees to invest a piece of their paycheck, pre-tax, and offers opportunities for employer-matched contributions. Taxes are paid when money is withdrawn from the account.**
Conversely, an Individual Retirement Account (IRA) is an individual account not sponsored by an employer and offers more freedom for choosing investments since they are not limited to an employer’s plan. There are two different types of IRAs: Traditional and Roth. Contributions are made to a Traditional IRA with un-taxed money and are only taxed upon withdrawal. For Roth IRAs, contributions are made with previously-taxed money, but you’re not taxed when withdrawing funds.**
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