401(k) vs. IRA: Which is Right for You?

Both 401(k) plans and Individual Retirement Accounts (IRAs) are tax-advantaged tools to help save for retirement. While both are designed to help build your nest egg, they serve different purposes and come with unique features that may impact your decision on how best to save.

Differences between a 401(k) and an IRA:

• Eligibility: A 401(k) is available only through your employer, and many companies offer these plans as part of their benefits package. On the other hand, anyone with earned income can open an IRA. This flexibility means that even if your employer doesn’t offer a 401(k), or if you’re self-employed, you can still save for retirement through an IRA.
• Contribution Limits: Contribution limits are subject to annual cost of living adjustments. One advantage of a 401(k) is the higher contribution limit. In 2024, you can contribute up to $23,000, with an additional $7,500 catch-up contribution if you’re over 50. By contrast, the contribution limit for IRAs is $7,000 (or $8,000 if you’re 50 or older). Learn more about IRA limits and eligibility here.
• Employer Match: Many employers offer a match on 401(k) contributions. For instance, if your company matches up to 50% of the first 6% of your salary, contributing enough to receive the full match might help grow your retirement savings.
• Investment Options: While 401(k) plans are often limited to the investment options provided by the plan administrator, IRAs typically offer more freedom in terms of investment choices. This can include a broader range of stocks, bonds, and mutual funds, allowing for greater diversification.

To learn more about an IRA, a personal savings plan that offers a variety of tax benefits, and the different types of IRAs that can help you reach your retirement goals, visit this link.

If you are curious about a 401(k) and how it works, view this link to explore more.

It’s Never Too Early to Start Saving for Retirement

It’s never too early to start saving for retirement. Even a small contribution now can grow over time. Whether through an IRA, a 401(k), or both, investing today sets the stage for financial security tomorrow.

If you’re unsure which retirement plan is right for you, or if you want to optimize your current plan, we’re here to help. Schedule an engagement meeting today to discuss your options and create a plan tailored to your goals.