SIFE Financial Corner

U-News Staff

Planning your retirement|

401(k)s and IRAs are investments used to save for retirement that provide some tax benefits too.


The first important thing about a 401(k) is that the account is managed through your place of employment. This is one of the easiest types of retirement plans because you get to decide how much you want to deduct from your payroll to contribute.

Another great benefit of a 401(k) is that contributions are made before taxes. It is just when you take the money, you will owe the government.

Lastly, even though there is third party that manages the company’s 401(k), you actually get to decide what kind of investments you want. (Stocks, bonds, mutual funds, etc.)

Traditional IRA

With a Traditional IRA, there is a limit to how much you can invest annually A maximum of $5,000 can be invested annually until the age of 50. Then you can invest $6,000.

Even though a Traditional IRA is not managed by an employer, you still get tax benefits just like a 401(k). Like a 401(k) taxes are paid after money is distributed.

Also, you can’t start withdrawing from your investment until the age of 59 years and six months. It is also mandatory that distributions begin at the age of 70 years and six months.

Roth IRA

Although this offers no initial tax benefits, it is the most flexible IRA.

Maximum contributions are the same as for the Traditional IRA, but there are no limits on when distributions can be taken. Best of all, the investor pays no taxes on distributions.