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By: Joe Body
Can There be a Clear Winner Between the IRA and 401K War?
There are a lot of people out there who do not know what to do with their money following the recent economic troubles. People lost a great deal of money when the economy went bottoms up and in turn this has now made them affraid to commit to investing. To ensure that you make no mistakes on your choice of investment for your retirement I am going to do a comparison between the main choices that you have. Here is my 401K vs IRA vs Physical Gold comparrison.
We are first going to have a look into the 401k and the benefits of investing with it.
Basically a 401K is your standard retirement plan which you will be given a choice through your work of investing some of your wages in each month. Up until the day that you choose to start withdrawing your funds in a 401k you wont pay a single cent of income tax on it which is one of its main advantages. When you try to get your money released earlier than your assigned retirement age then you will often be punished for it and made to pay a lot of money in various taxes.
I feel that when people put their savings into a 401K then they can feel extremelly out of control in regards to their money. This is because you cannot just withdraw your money at will and if you do you can often face heavy penatlies. In this day and age there are an increasing number of people who are getting to their retirement age who thought their money was safer than it is turning out to be in their 401K's. When 2008 came the economy took its worst hit it has seen in a very long time and this instantly woke a lot of people up to the reality that their money is not as safe as they first thought. If you are looking into a long term investment I would say that 401K's are not a great choice as they hold too much long term risk.
401k vs IRA: Time for the IRA!
IRA funds usually can be placed into 2 different common types that people can open for retirement. There are so many options available out there that this first type of IRA that we are going to look at in my opinion is easily passed by and it is called the traditional IRA, it does carry some advantages but definitly more disadvantages. The traditional IRA is distributed to its investors 100% on an age basis and I feel that this is its biggest down fall. Basically the rule here states that after you reach 70 you have got to start withdrawing your money weather you like it or not so come 70 and a half you have to make that first withdrawl. One of the main down falls of this type of IRA is that you can really run into some troubles with the IRS if you fail to withdraw your savings in time. This fact makes it a bad option for a retirement investor.
When we look further into the Roth IRA we can quickly see that it also carries problems of its own, such as it is not tax-deductible. One of the other points that I have discovered regarding the Roth IRA is that you have to pay your full tax amount in one lump for each year because it does not reduce your adjusted gross income. Right now the Roth IRA is probably the best option that is around for a retirement plan today. The only other thing I would suggest is looking into one that allows you to add physical Gold.
Author Resource:->??For more 401K vs IRA information check out Gold Bar Member.
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