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Some Key Differences Between IRA and 401(K) Accounts

Some Key Differences Between IRA and 401(K) Accounts

Planning for retirement is a very crucial thing. It’s a decision that all of us will have to make at some point, however, people don’t talk about that enough.[1] Pensions are becoming non-existent. Those who are receiving them are most likely to be our grandparents. They’re guaranteed a certain amount of money from their retirement day through the remaining years of their lives. Unfortunately for our generation, we won’t be benefiting from such a privilege.

Therefore, it becomes even more important for us to start thinking and start planning for our retirement.

When we talk about retirement, there are usually two popular options that come to mind. The first one and the most recognized one is the 401(K). The second one is the Individual Retirement Account, or IRA.

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Although IRA and 401(K) accounts are the two most common contribution plans to retirement, they both do have their differences. One might be the right fit for you, while the other is way off base for what you need. Surprisingly, some people manage to have both of them.

What you should know about an IRA account

An Individual Retirement Account, or an IRA, gives anyone the opportunity to contribute to their retirement. You’ll have to be under the age of 70 in order to be qualified.

One thing I like about IRA is that you can own Gold as your asset. Yes, I mean it. You can literally own gold and other precious metals. However, you’ll need to conduct your research in order to pick the best gold IRA companies.[2]

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It’s also safer when you invest your money into gold IRA companies because no manipulations can be done, which is different from what you would expect from some other avenues of investing. Another thing to note is that your asset will not be taxed until you decide to withdraw.

For the year 2017, your traditional and Roth IRA contributions can’t exceed $5,500 ($6,500 if you’re 50 years of age or older). However, this limit doesn’t apply to rollover contributions.[3]

What about 401(K) accounts?

401(K) accounts can be opened through employers only. There’s a qualification requirement that needs to be fulfilled in order to be considered. Some employers may not offer this retirement plan, though and if yours doesn’t, you can always do a Roth IRA.

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Many employers tend to offer matching contribution when you open a 401(K). For example, if your employer would match your account contributions up to seven percent of your income, you should never contribute less than seven percent yourself. If you do contribute less than that, then you would be turning down some free money, which you wouldn’t want to do.

Which one would be my pick if I were to start now?

As someone who’s very cautious, I always ensure that anything I’m about to get involved in is safe, reliable, and beneficial to me. I don’t like to waste my money on things that don’t have any value.

In the case of 401(K) and IRA accounts, I’d go with IRA because it gives you more freedom while allowing you to also save more money from it. If you choose to invest in gold companies, that’s even better for you, as they’re more secured.

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To conclude

We all will want to retire one day, but unfortunately, some of us may have to work for some additional years, or even for a lifetime period. That’s why it’s very important that you start thinking about your retirement plans as early on in your life as you can.

You don’t want to be in your 70s and still have to wake up every morning to go punch in. Instead, you should be looking forward to traveling the world when you reach your retirement age. Take control of your future now and start planning for your retirement. You’ll be very happy when the day comes.

Featured photo credit: Dr. Larry Anderson via impowerage.com

Reference

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Last Updated on March 29, 2021

Life Insurance: A Secure Way To Protect Your Future.

Life Insurance: A Secure Way To Protect Your Future.

Life is a journey full of ups and downs. No one can actually predict what might happen the next moment; there are times where the happiest moments do not even take a second to turn into the gravest. Planning for your future can help you face such unwelcomed but irrepressible situations with much ease. We all want to make every memorable event of our life more special and to cherish all those moments happily and worry less, you must financially plan your future. But no one has control over life and death. Who would wish to see his family suffer in his absence? Insurance hands over the financial jeopardy of life’s happenings to an insurance company.

Importance of getting a life insurance

No one has control over life and death. Nobody would like to see their family suffering in an absence, and that’s why many people recommend life insurance. A life insurance plan is one of the best ways to secure the future of your family, even against those financial troubles after an untimely demise. These plans are safe and credible, and you could trust them for your family’s better future.

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On the other hand, a life insurance policy is a contract between a company (insurance provider) and policyholder in which the insurance provider ensures to pay a certain amount of money to the nominated beneficiary in case of the policyholder’s death during the term of the agreement. There are different types of insurance plans, and it is important for you to know the benefits of those plans such as a funeral, medical or some life expenses provided they are mentioned in the agreement.

Choosing the right insurance plan

If you’re about to select an insurance plan, you should consider some important factors:

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  • The time at which you start investing in a program and the number of family members you want to get insured. Obviously, a married man with two children has different needs compared to a single one. The number of persons who are dependent on an individual also varies from person to person.
  • The next thing you need to consider is you and your family needs. What are your child’s dream, your retirement plans, for how long would your dependents need financial support, any personal injury, etc. And do not forget those events or situations that will surely demand a huge sum of money.
  • The next thing one must consider is your current income. You should preferably choose a plan which you can afford.

Now you must be having a pretty clear idea of how to choose the best plan for you. Further, you should also compare various plans offered by different companies and numerous sites available online that help will you to compare them.

Differences between life insurance plans

Here’s a short brief of some plan categories you can choose according to your needs:

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  • Term Insurance Plan – You have to pay once, and your nominee gets the paid money under your misfortune demise. It ensures a person for a fixed time. If you survive the policy period, you do not get your premiums back.
  • Whole Life Policy – This plan continues for your lifetime. Under this, the policyholder has to pay regular premiums, until their death.
  • Endowment Policy –  In case the individual dies during the tenure, the beneficiary gets the amount assured. If the person survives the policy tenure, they gets back the premiums paid with other investment returns along with several other benefits.
  • Money Back Policy – In this a portion of the money invested is returned to the investor at regular intervals. If you survive the insurance term you get the entire amount back; else the beneficiary receives the entire sum assured.
  • ULIPs – These are the life insurance plans that offer you future security plus wealth creation options.

Many people do not opt for whole life policy and endowment policy because of the high amount of money you need to pay, while others may prefer to opt for these if they have a high life expectancy. Surely you will find the best one for you.

So what are you waiting for? Plan for your future and live a happier and carefree life today.

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Featured photo credit: aryehsampson.com via aryehsampson.com

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