Know Your Retirement Plan OptionsGenerally, there are four types of retirement plans to consider: 401(k), Traditional IRA, Roth IRA, and myRA. The main differences between the plans (as demonstrated in the table below) include:
- Contribution limits
- Ease of implementation
The Benefits of a 401(k) vs. a Traditional IRA, Roth IRA, or myRASome people erroneously think that, without a match, there is no point to contributing to a 401(k). However, there are many benefits to a 401(k), even without employers matching contributions.
- Pretax deductions: The deductions taken from your paycheck to go toward your 401(k) is pretax money, so your contributions essentially lower your taxable income at the end of the year.
- Compound interest: The money you invest compounds every year (tax-free!) until you are ready to retire. As this Business Insider chart demonstrates, the earlier you start saving for retirement, the more potential you have to gain in compound interest.
- Easy for both workers and employers: Contributing to your 401(k) is a painless process to maintain once you’ve established your plan. In addition, Human Interest allows you the option of effortlessly managing your 401(k) online. For employers, enrollment, contributions, and compliance are completely streamlined or automated, making the onboarding and administration seamless for all parties.
- Higher contribution limits: If you’ve already maxed out with your IRA, you may be looking for additional tax-friendly places to invest, and a 401(k) has significantly higher contribution limits.