Many people work for a firm with an employer sponsored retirement plan. Often those plans offer matching money to increase your savings. Don't miss out.
Planning for retirement can be a very intimidating thing, and oftentimes it may seem daunting with the amount of student loans, house payments and day-to-day expenses. Although making financial decisions and large lifestyle changes may seem difficult, one easy step to make towards retirement is taking advantage of retirement plans from employers that match. This is an opportunity of which you should always take advantage.
Matching programs provide participants with free money based on how much of their own money they save. A typical set-up is that you get dollar-for-dollar matching money from the employer up to 3 percent of you gross pay. So, you can save 3% out of your paycheck and have 6 percent of your pay saved into your retirement account. It's a great deal.
Some employers do not offer retirement, and although this may seem daunting, it does not leave you without options. At Dunncreek Advisors we help our clients invest in self-directed retirement plans like a Roth IRA or traditional IRA, depending on many circumstances. We will help figure out which one works best for you and allow your retirement to be as easy as possible.
So what is an IRA?
An IRA is an Individual Retirement Account. It is a type of savings account that is designed to help you save for retirement and offers many tax advantages. There are two different types of IRAs, traditional and Roth.
So what is the difference between a Traditional and Roth IRA?
The biggest difference between a Traditional IRA and Roth IRA is the type of tax benefit each offers. With a Roth IRA, you get no deduction for contributions. If you follow all the rules your investment earnings will be distributed tax and penalty free during retirement.
Traditional IRAs can provide deductions for contributions and you can defer taxes on investment earnings until funds are withdrawn which usually happens in retirement. Distributions from a Traditional IRA are always subject to income tax in the year you spend the money. If you are in a lower income tax bracket in retirement, you have more spendable money in the end.
Both Roth IRAs and Traditional IRAs have tax benefits, but deciding which IRA will work best for you depends on whether you think your tax rate when you reach retirement will be higher or lower than what you’re currently paying.
If you have an employer sponsored plan with matching, be sure to take full advantage of the free money. If you have questions about your company plan and the best options for you, give us a call. At Dunncreek Advisors we are here to help you find the smartest thing to do with your retirement money.
If you are looking for a financial advisor in St. Paul, Minnesota and want someone to help you with your future, then Dunncreek Advisors is here for you. Do not avoid thinking about the future, instead prepare and be ready to take full advantage of your later years and do it comfortably. Call us today and let us make life easier for you.
If this article has you thinking about your own circumstances, contact my office at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.