Financial Tips For Better Living
Understanding the Different Types of Retirement Investing Accounts
There are many ways that a person can invest for retirement. However, among the hundreds, if not thousands of different methods of investing for retirement, perhaps the two most popular investment tools are 401(k)s and IRAs. Even though these are well-known retirement plans, the question that is asked so often is, is a 401k an ira.
While 401(k)s and IRAs both share similar tax sheltering benefits, the similarities when it comes to these types of retirement investment tools typically end there. First of all, 401(k)s, much like 403(b)s and 457 savings plans, are employer-sponsored. This means that if your employer doesn't provide these types of retirement savings plans, there is no way that you can own one.
In these situations, many people turn to IRAs. The benefits to an IRA is that it is extremely easy to find. There are a wide range of businesses and financial institutions that offer standard or Roth IRAs for the purposes of investing for retirement. Additionally people are now investing in a gold ira for their retirement, as this provides exceptional additional benefits.
While the premise of both 401(k)s and IRAs are the same, in terms of having a group of diversified investments working towards one central return on investment, there are a number of differences. For example, 401(k)s will allow you to contribute, on average, more per year than an IRA. However, administrative costs of 401(k)s can cut into the 401(k)s performance. These administrative costs are somewhat less on IRAs, and in some instances, IRAs often outperform 401(k)s in the short-term.
Another benefit to IRAs is that there is more flexibility in terms of the type of investments permitted. Standard IRAs, as well as Roth IRAs, give the investor very little say so in the types of investments that are made. However, with the advent of self-directed IRAs, investors can use IRA funds to invest in things such as real estate and precious metals. While these self-directed IRAs are very different from standard IRAs, they are still valid individual retirement accounts that can help a person to save money and grow wealth for their retirement.
As you can see, while there are similarities, there are also some very striking differences between an IRA and 401(k). However, regardless of the differences, both offer tremendous tax sheltering benefits. They also offer proven returns on investment year after year. If you're looking to save for your retirement, either one of these investments are good things to have. You can actually rollover your 401K into a IRA. There are a larger number of companies that will do that for you. Check out our gold ira review page that gives you more information on this subject.
