💰All 'bout that retirement fund

Today, we're exploring two essential tools for retirement planning: Roth IRAs and 401(k)s. We'll break down the key differences between these accounts and how each can benefit your financial future. Whether you're looking for tax-free growth or want to maximize employer contributions, understanding these options can help you build a solid retirement nest egg. Let's get into it!

- Milan

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THE MONEY BREAKDOWN

“Roth IRA”

A Roth IRA is a type of individual retirement account that offers tax-free growth and tax-free withdrawals in retirement. Unlike a 401(k), contributions to a Roth IRA are made with after-tax dollars, meaning you've already paid taxes on the money you contribute. However, the big advantage is that your investments grow tax-free, and you won't owe any taxes when you withdraw the funds in retirement, as long as you follow the rules.

To use a Roth IRA effectively, start by contributing up to the annual limit, which is $6,500 for 2024 (or $7,500 if you're 50 or older). One key difference from a 401(k) is that you have more control over your investment choices, as you can select from a wide range of stocks, bonds, mutual funds, and other securities. Additionally, Roth IRAs don't have required minimum distributions (RMDs), so you can leave your money in the account to grow as long as you want. This makes a Roth IRA a great complement to a 401(k), offering flexibility and tax advantages in retirement. Start investing today with these brokers.

MILAN’S HACK OF THE DAY

 Take Advantage Of 401(k)s

Let's dive into a key money hack: taking advantage of employer-sponsored retirement plans, like 401(k)s. These plans are a great way to save for your future because they offer tax benefits and often come with employer matching contributions. When you contribute to a 401(k), the money is taken out of your paycheck before taxes, which can lower your taxable income. Plus, many employers match a portion of your contributions, which is essentially free money added to your retirement savings.

One of the best parts about 401(k)s is the power of compound growth. The money you invest grows over time, and the earnings on your investments get reinvested, generating even more earnings. To maximize your savings, aim to contribute at least enough to get the full employer match. It's a simple yet powerful way to boost your retirement nest egg and ensure you're on track for a comfortable future. Learn more about the different accounts you should be using in your very own customized money plan. Answer a few simple questions in our free quiz to get started.

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