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What is the best savings tool for retirement?
Many of you that are saving for retirement are faced with deciding between IRA's, company 401K's, and other types of savings plans. Which product is best for your individual needs depends on a variety of factors and also your personal willingness to take on risk.
401k's, in which you pay no taxes to the IRS until you make withdrawals from your account at retirement, are generally the best option to save for your retirement "if" there is a company match. Unfortunately most 401k's also generally have only a dozen or so mutual funds that you can hold. With an IRA there are litterally thousands of mutual funds that you may buy for your account if you have a brokerage account.
If there is no company match for your 401k I feel the best option for an investor is to invest in a standard IRA or a Roth IRA. The standard IRA is like a 401k, since they are initially tax free, and you do not pay any taxes to the IRS for your contributions, but of course with an IRA there is no type of company match. On a Roth IRA, on the other had, you do pay your taxes up front. With IRA's you have the freedom to purchase any mutual fund or almost any other form of investment that you may wish to hold by using what is called the brokerage link associated with your account. Unlike a 401k, there is no limit to the types or numbers of mutual funds that you may buy in an IRA account if you have a brokerage account.
I personally feel the best IRA to use is a Roth IRA. If you can afford to do so, you pay your taxes up front, and what you earn or make with your contributions can be taken out, or withdrawn, at retirement from your Roth IRA totally tax free. You are only paying taxes on your contributions and not on your earnings. What a great deal! I think anyone still working should consider having a Roth IRA, even if they have a 401k at work.
I would be happy to discuss with you the various retirement type savings plans available for you to use, and determine which one best suits your individual needs.
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