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IRA vs. 401(k): Which is Better for You?
by Donna Fuscaldo
Published October 29, 2012
When it comes to retirement planning, you have choices when it comes to picking what savings vehicle best fits your lifestyle. While most people will simply go with the 401(k) plan offered by their employer, there are other options like the Roth IRA.
When deciding which tool will house your nest egg, experts advise taking into consideration your discipline, income and tax goals.
With a company-sponsored 401(k) plan, employees can contribute pre-tax dollars from each pay check, which lowers their taxable income at the end of the year. In some cases the employer will match a portion of the contributions, effectively giving the employee free money. When it comes time to cash out of the plan, when you reach 59 1/2, you would have to pay taxes on the distributions.
An Individual Retirement Arrangement (Roth IRA) is another retirement savings tool. The money you put this account can't be written off on taxes, but money grows tax free and you don't pay taxes on the money when you take it out as long as you are over 59 1/2 and have had the Roth IRA open for at least five years. Read more: