Write Articles A community of people who love to write

The easiest domain name (Note the .ORG) - Absolutely Free!

Home | Submit Articles | Login   

Roth IRA vs 401K retirement saving plans (for USA residents)

BY: Jessica | Category: Business and Finance | Post Date: 2009-09-12

•    Read Comments

•    Print This Article

Help others find this article:

Show All Social Bookmarks

Saving for retirement has always been one of my side goals of life. We live in a world where everyone cares only about living in today without saving anything for their retirement. When we get old with little or no savings and face the daunting reality of life, it may actually be too late. We are left with two options, either continue to work till the last breath or try to totally on one of the social programs of government like social security, food stamps and homeless shelters. It is extremely important to save for the retirement early in life to live a beautiful life we always imagined.

The two best programs to save for retirement for most people are Roth IRA and 401K savings account. Both Roth IRA and 401K saving plans have tax advantages and the maximum contribution limit on each one is preset by government at the beginning of each year. For example for year 2009 you can put $16500 in 401K retirement saving plan and $5000 for Roth IRA retirement saving plan. Citizens more than 50 years old can contribute a bit higher than others. In both plans you can withdraw money without penalty at the age of 59.5 years or more. There are some exceptions which are beyond the scope of his article.

Basics of 401K retirement account:
For most people like me who are employed (salaried employees) can put about a maximum of 16.5K per year (2009 figure). I believe that a person should be atleast 21 years to participate in 401K retirement saving plan. The best part of 401K plan is that most employers also throw in couple of grands based on their matching policy. All contributions made in this scheme are pre-tax and the tax is paid only when you withdraw the money during retirement. You can take loan against retirement plan and must repay if you plan to intend to temporarily withdraw money before 59.5 years of age. If you do not replay, all that money becomes taxable plus there is a 10% additional early withdrawal penalty. You can invest money in stocks, stock mutual funds, bond mutual fund or capital preservation funds. All depends on what your company has to offer. After you leave the company and you have substantial amount left in your 401K account, you can either leave it in your company sponsored 401K plan, transfer into a new 401K plan or the best is to put into a regular IRA (nor Roth IRA) retirement account. Even if you do not contribute maximum allowed, it is recommended to atleast match your company's contribution, as your company's contribution is like free money. 401K also helps to reduce your Adjusted Gross Income, therefore may put you in a lower tax bracket.

Roth IRA retirement saving plan:
You can contribute up to $5000 (year 2009 limit), after tax money. Money grows tax free and you need not pay taxes again during the time of withdrawal. Roth IRA's are my personal favorite. There are certain minimum and maximum salary limits under which you can contribute money, but 90% of all working people qualify. Similar to 401K retirement account, money in Roth IRA is also invested in stocks, bonds or capital preservation funds. You can open accounts in a variety of companies like Scottrade, TD Ameritrade, Fidelity, Vanguard and many others.

Every working individual should definitely put money in either of Roth IRA or 401K retirement saving plans for a better future.

Article Source: http://www.saching.com

About Author / Additional Info:

Additional Articles:
* All you need to know about PULSE RATE and causes for it's increase
* Women in Pain - A woman's sacrifice for her family and children
* Survival skills needed when stranded in the ocean
* Improvement probably sounds pretty extreme to you!
* Beat the dandruff trouble

Does this article violate or infringe on your copyright ?
It is a violation of our terms for authors to submit content which they did not write and claim it as their own. If this article infringes on your copyrights, then use our Contact us form with the detailed proof of infringement along with the offending article's title, URL and writer name. If you do not hear back from us then contact us again in another 10 days. Thank you.

Comments on this article: (0 comments so far)

* Additional comments are now closed for this article *
Comment Comment By Comment Date

Article Views: 5948

Page copy protected against web site content infringement by Copyscape
Copyright 2010 saching.com - Do not copy articles from this website.

Important Disclaimer: All articles on this website are for general information only and is not a professional or experts advice. We do not own any responsibility for correctness or authenticity of the information presented in this article, or any loss or injury resulting from it. We do not endorse these articles, we are neither affiliated with the authors of these articles nor responsible for their content. Please see our disclaimer section for complete terms.

| Home | Disclaimer | Xhtml |