Retirement Plan Choices Experts Secretly Swear By
Individual Retirement Accounts (IRAs): Flexibility and Control
IRAs provide individuals with more control over their investments compared to employer-sponsored plans. There are two primary types: Traditional IRAs and Roth IRAs. Traditional IRAs allow for tax-deductible contributions, with taxes paid upon withdrawal during retirement. Roth IRAs, on the other hand, are funded with post-tax dollars, but withdrawals are tax-free. The maximum contribution limit for IRAs in 2023 is $6,500, with an additional $1,000 catch-up contribution for those over 502.
Pension Plans: A Vanishing Benefit
Once a staple of retirement planning, defined benefit pension plans are becoming increasingly rare in the private sector. These plans provide a guaranteed income stream based on salary and years of service. However, they are more commonly found in public sector jobs today. If you're fortunate enough to have a pension, it's crucial to understand the terms and conditions, including vesting periods and payout options.