What Types of Retirement Accounts Exist & How Do You Know Which One is Right for You?
Jenny Taylor • November 15, 2022
With so many different types of retirement accounts, how do you know which one is right for you? It may be easier than you think to decide what the best option is.
Employee Sponsored Retirement Accounts
First of all, if you work for an employer that provides retirement benefits in an employee sponsored retirement account, then the decision has already been made for you.
Depending on where you work, such as a for-profit company, a non-profit company, or the government, you may have a 401K, 403B or Thrift Savings Plan (TSP).
Often these employers will match your contributions up to a certain percentage, say 3-5%.
But what about those that are either self-employed or work for a company that doesn’t have
retirement benefits?
Traditional IRAs and Roth IRAs
The two main types of self-directed retirement accounts are the Traditional Individual Retirement Account (Trad IRA) and the Roth Individual Retirement Account (Roth IRA).
The main difference between these two is WHEN you pay taxes on the money contributed and distributed/withdrawn. Money contributed to a Traditional IRA is considered pre-tax and would count as a deduction on your earned income for that tax year. This means that when you take distributions (remove the money), you will pay taxes upon distribution. In other words, the money invested is tax deferred until you take distributions.
The Roth IRA is different because you pay taxes on the income that is contributed to the account. The money contributed and any gains are tax-free in retirement. For a great comparison chart see
this article
at Investopedia. There are income limits with the Roth IRA, which adjusts most years, you can review that in the article listed as well.
Generally speaking, both types of retirement accounts have maximum contribution limits for 2022 of $6,000; or $7,000, if age 50 or older. For 2023 these limits are increasing to $6,500; or $7,500, if age 50 or older.
If you have both types of accounts the combined total contributed between the two must not exceed the overall IRA contribution limit for that tax year. An example of this would be that someone under 50 could contribute $3,000 to a Trad IRA and another $3,000 to a Roth for the tax year 2022 for a total of $6,000 max between the two types of accounts.
How Would You Decide Between a Traditional IRA and a Roth IRA?
You should consider asking yourself this important question: Will I pay more in my taxes on my earnings now than when I retire?
You may have more tax credits or deductions now compared to when you are retired and taking distributions from your Trad IRA, so you may end up paying more in taxes once retired, especially if you are still working and also have to start taking distributions.
Whereas, if you contribute to a Roth IRA now, you will pay taxes on those earnings now and be able to withdraw them tax free upon retirement.
We recommend speaking with a Tax Attorney or CPA to discuss eligibility for retirement
accounts because if you also work for an employer that provides retirement benefits, there are limits on how much you can contribute to self-directed IRAs. They could also possibly discuss what your tax situation would look like upon retirement to help you decide which type of self-directed account best suits your personal financial needs.
Either way you go though, saving for retirement is important, so start saving as early in your life as you can and if you haven’t started yet, there is no time like the present! Get an IRA account opened and start contributing, even just $50 a month if you can! Be consistent!
At TRADEway, we’re here to help with your short-term trading or long-term investment needs–we have programs available which can educate and support you through whatever path you decide to take. Want to be more active in your investments? Want to take a more passive approach? Either way, we have something that could help your family. Reach out TODAY!
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What does it mean for TRADEway to be a faith-based stock market education company? We started our company with a specific audience in mind–God’s people–to equip them with decades worth of knowledge and experience in the business world so that they too could go out and make a difference. Because let’s face it–it’s going to take some money to build a Christian culture and expand God’s kingdom. Remember, God works through means. And you–my brothers and sisters–are the means that he uses to make these things happen. The Lord wants us to thrive financially. We see this throughout scripture. And so what better place to go than to His word as our guide.
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Today I’m exposing three popular pieces of trading advice that sound smart but can actually wreck your trading performance. If you’re serious about becoming a consistently profitable trader, listen to this one all the way through.
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•
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Today I’m exposing three popular pieces of trading advice that sound smart but can actually wreck your trading performance. If you’re serious about becoming a consistently profitable trader, listen to this one all the way through.
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What if I told you that the Bible teaches that you can use debt to get out of poverty? Today I want to take on the question “Is it okay to take on debt as a Christian?” Now debt is obviously a big topic, and people tend to have a lot of opinions about it. My hope is that I’m able to bring some Biblical clarity to the issue and offer some things for you to think about. Let’s get into it.
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By Ben Mitchell
•
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What does it mean for TRADEway to be a faith-based stock market education company? We started our company with a specific audience in mind–God’s people–to equip them with decades worth of knowledge and experience in the business world so that they too could go out and make a difference. Because let’s face it–it’s going to take some money to build a Christian culture and expand God’s kingdom. Remember, God works through means. And you–my brothers and sisters–are the means that he uses to make these things happen. The Lord wants us to thrive financially. We see this throughout scripture. And so what better place to go than to His word as our guide.
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•
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If you’ve been struggling with your long-term savings goals, you’re not alone and I can help. It’s normal for your account to fluctuate with the markets, but overall, your account should be increasing each month. If it’s not, don’t panic. Just listen to this all the way through, because I’m about to reveal three unusual ways to potentially boost your long-term savings accounts.
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•
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If you’ve been struggling with your long-term savings goals, you’re not alone and I can help. It’s normal for your account to fluctuate with the markets, but overall, your account should be increasing each month. If it’s not, don’t panic. Just listen to this all the way through, because I’m about to reveal three unusual ways to potentially boost your long-term savings accounts.
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•
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Experienced traders know this: Sometimes trades go against you. It’s going to happen. And it’s normal. But here’s the thing you need to know: You only need to get 5 or 6 trades out of 10 right to win in order to be profitable, and to have the potential to change your life financially. The key to becoming profitable isn’t to have every trade go perfectly. It’s to win big and lose small. And a good rule of thumb to shoot for is making a 30%+ return on a trade when it works, and only losing 8-10% at the most if the trade doesn’t work. If you want to learn more about how to maximize your gains and minimize your losses, join us for the next Unlock the Stock Market Challenge, where we’ll teach you the foundations of trading in just five days.
By David Mitchell
•
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Experienced traders know this: Sometimes trades go against you. It’s going to happen. And it’s normal. But here’s the thing you need to know: You only need to get 5 or 6 trades out of 10 right in order to be profitable, and to have the potential to change your life financially. The key to becoming profitable isn’t to have every trade go perfectly. They key to becoming profitable is to win big and lose small. And a good rule of thumb to shoot for is making a 30%+ return on a trade when it works, and only losing 8-10% at the most if the trade doesn’t work. If you want to learn more about how to maximize your gains and minimize your losses, join us for the next Unlock the Stock Market Challenge, where we’ll teach you the foundations of trading in just five days.