Sep 13 · 2 min read
Key Takeaway: Choosing between an IRA or a 401(k) can be tough so we made an easy gameplan for you to follow, First and foremost, make sure to get your 401(k) employer match. You can’t pass up this free money! What you do next will depend on your personal situation.
When it comes to building your nest egg for retirement, there are two main accounts designed specifically to help you do so: an IRA and a 401(k). But which one is right for you?
When deciding on whether to open an IRA, 401(k), or both (yes you can do that), your focus should be on one question:
If your employer offers a 401(k) plan with an employer match: At a minimum, you should fund your 401(k) up to the percentage that gets you the maximum match from your employer. For instance, if your job offers you a 401(k) match of 50 cents for every dollar you contribute up to 6% of your pay, you should at least put 6% of your pay into the 401(k). Doing so will get you the maximum match of 3%! This 3% of your income is FREE MONEY so don’t pass it up. After you make sure you are getting the maximum match, consider opening an IRA or increase how much money you are adding to your 401k.
If your employer DOES NOT offer a 401(k) plan with an employer match: You should start with just a Traditional or Roth IRA. If you reach the contribution limit of your IRA, start funding that 401(k) through your job if you are still wanting to add money to a retirement account. If you’re not sure of which type of IRA you should open, find out which one is the best for you here.
Retire Like A Boss