401k Vs IRA

401k vs IRA which one is better? These are two competing retirement savings plans which the government will let you use to prepare for your future. But which one should you focus on?

Well let’s take a look at each plans advantage and disadvantage.

401k advantages

The advantages to a 401k plan are numerous. For one there is just a higher 401k maximum contribution limit. This means that you can simply put more money into a 401k then you can put into an IRA. This is big because the more money you can save the more it can add up.

Another major advantage of a 401k is that there is a chance to get free money. Some employers will reward you for investing into your own plan. For example if your employer matches you $.50 on the dollar and you invest $1000 your employer deposits an extra $500.

This free money can add up and cause your retirement plan to skyrocket.

The last major advantage is that it is easy; your employer manages it and takes money out of your paycheck. It allows you to save without even having to think about it (unlike an IRA, which you have to deposit money into it yourself).

Those are the advantages of a 401k, but there is one big advantage to owning an IRA.

IRA advantage

For one an IRA may give you more options when it comes to investments. Some even go so far as to let you buy real estate with your IRA.

The added options can bring higher returns and should definitely be considered.

You Can Do Both

If you have enough money coming in you can always invest into both a 401k and an IRA. This way you can be sure to have enough money coming in for when you actually retire and start to need that money.

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