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401(k) vs. IRA

Thes Play-by-Play

401(k) vs. IRA

Employer Retirement Plan (401K):

Pro's:

-Pre-tax contributions + tax-free growth

-Employer matching contributions (maybe)

-Automated savings through payroll deduction

Cons's:

-Contribution limits on higher income-earners

-Company-selected investment choices

-Employer-based, so portability issues if you change jobs

Individual Retirement Account (IRA):

Pro's:

-Tax-free growth

-The account is yours, so no portability issues

-Money can be accessed early under certain circumstances

Cons's:

-Confusing array of choices (Roth, Traditional, etc.)

-Penalties for early withdrawal under most circumstances

-Stringent contribution limits

The bottom line: if you have access to an employer retirement plan with a matching program, take advantage of it - it's free money!

IRA Q&A

How do you roll?

Rolling over your IRA is a pretty simple process, if you do what's called a direct rollover. Your first order of business is setting up an account at a new provider, usually a mutual fund company or brokerage firm. Once your account is set up, you-or even better, your new provider-will send a Rollover Request to your current provider. That's all it takes-the rest will happen behind the scenes between the two companies.

Thes Play-by-Play

IRA Q&A

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