If you’re already saving for retirement, well done. Seriously, being consistent about putting money to the side takes discipline and consideration. But are you stashing your hard-earned cash in the right accounts for your financial situation?
There are many tax-advantage retirement accounts. If you have access to an employer-sponsored 401(k) plan, for example, you contribute pre-tax dollars, and lower your taxable income. That’s a win. Your employer might also offer to match your contributions up to a certain limit. Every year, the IRS sets maximum limits for how much you may contribute. In 2023, it was $22,500 , and next year it will be $23,000 .
Not all employers can offer 401(k) plans, and depending on the work you do, you might have access to a different kind of plan, such as 403(b), or profit-sharing plans.
And there are other ways to save, too, including cash-value life insurance plans, annuities, and IRAs. Complementing your retirement savings with different accounts might give you peace of mind as you plan for your future.
What’s an IRA and How Can It Help You Save for Retirement?
An IRA, or individual retirement account, is another way to save for retirement. Even though the IRS sets limits for how much you can contribute each year ($6,500 in 2023), you can grow the money in your account by investing it. Plus, you often also get tax breaks.
IRAs are available to anyone who earns income. And even if you’re a non-income earning spouse, you can still open a specific type of account.
The two most common types of IRAs are traditional and Roth IRAs. They’re different in the way they are taxed, with traditional IRAs being funded with pre-tax dollars, and Roth IRAs not tax deductible upon contribution, but tax-free in retirement.
You can fund your account with cash from your savings, set up regular monthly contributions, or get started with a tax refund to get the ball rolling. Importantly, if you change jobs but still have a 401(k) plan with your prior employer, you can rollover your plan into an IRA account.
Another nifty thing about IRAs: You can make your annual 2023 contributions until the unextended federal tax-filing deadline (aka April 18th) in 2024.
SoFi Invest® offers traditional and Roth IRAs. Sign up and get started today.
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