Tag Archives: retirement

Comparing & Contrasting a Roth IRA vs. 401K

At some point, many individuals will become serious about saving money and putting aside funds for retirement. This often, in turn, prompts the opening of various retirement savings accounts. At this point, Roth IRAs and 401Ks are some of the most popular options. However, these two accounts are not the same, by any means, and should not be treated as such.

Some people are better suited for 401Ks while others do exceptionally well with putting money into a Roth IRA. Nevertheless, a critical and thorough understanding of the differences and features of the aforementioned accounts is absolutely paramount.

An Overview

One of the greatest distinctions between Roth IRAs and 401Ks is the functionalities of the two accounts. Investopedia explains that while Roth IRAs are started between an investment firm and the people which come to them, 401Ks are plans where workers permit their employers to put a percentage of their pay into the account. Each individual has their own ideas of which retirement savings account is best for them. Both Roth IRAs and 401Ks each come with their own upsides, guidelines, and stipulations.

The Benefits

Both Roth IRAs and 401Ks come with their own benefits which are designed to appeal to prospective customers. The Simple Dollar lists the following benefits which are associated with Roth IRA accounts:

  • Future tax-free withdrawals
  • Ability to withdraw contributions without facing penalties
  • Ability to select desired brokerage firm and choices pertaining to investments

401K retirement savings accounts also come with their own unique upsides, which read as follows:

  • Potential annual tax savings
  • Opportunities for monetary employer match
  • Options to set up automatic deposits
  • Gradual increase on allowed contributions

Which One is Best For You?

Ultimately, each individual will have to decide which retirement savings account is best for them. Believe it or not, choosing whether or not to set up a Roth IRA or 401K does not have to be an “either/or” decision. There are some people who have both accounts and others who employ alternative means to save money and invest in their retirement.

However, for individuals who are interested in setting up one (or both) of the aforementioned accounts, Fidelity has some helpful hints and advice:

  • 401Ks may prove to be slightly more beneficial for long-term savings.
  • Roth IRA accounts are usually better for individuals who see tax increases in their future.
  • People who wish to diversify funds put aside for retirement may find that setting up a 401K and Roth IRA accounts is advantageous.

 

Authored by Gabrielle Seunagal

Important Things To Do Before Retiring

As people gradually enter various stages of their later life, they may begin to consider the merits of retirement. While some individuals decide to keep working, others feel as though they have worked for long enough and are ready to retire. However, before one enters retirement, there are some very important things they need to do.

Make Sure You Have Enough Money to Retire

The desire to retire from work is understandable, especially as people get older. However, ensuring that one has enough funds is absolutely paramount. According to The Balance, retirees should have enough capital to maintain their current lifestyle. People who are looking to retire should also be able to cover expenses such as car and house maintenance, utilities, and any unforeseen financial emergencies. In many cases, people spend years, if not decades saving up for retirement. One of the worst things in the world would be to retire and then abruptly have to re-enter the workforce due to depleted funds.

Sitting down with a financial adviser prior to retirement is also recommended.

Decide What to Do During Your Retirement

One of the many upsides of work is that it provides structure. Many people wake up in the mornings, go to bed in the evenings, and schedule the activities of their day around their professional duties. Structure comes with both advantages and disadvantages, however, many factors change after an individual makes the decision to retire.

Gone are the days of having to abide by a certain timeframe or schedule. Theoretically, a retired person can do whatever they want to do with their day, so long as they are able to financially support themselves. This is where hobbies and interests come in. Many retirees may decide to take a class, travel, or otherwise engage in activities which they couldn’t partake in during their working years.

Regardless of what retirees decide to do during their new phase of life, having interests and passions is so important. The pitfalls of simply sitting at home all day and doing nothing are well documented. Retirees should make it a point to frequently leave their homes, engage with other people, and make sure that their bodies and minds remain active. Exercise and volunteer work are some productive and affordable activities for retired persons to consider.

A Final Word

Retirement has always been meant to be a time of relaxation, reflection, and hopefully growth. Although the majority of retirees are older people, there is always more room for development. With the proper financial planning, retirement can be an amazing, enriching part of life. Ultimately, each person will have to make the decision as to whether or not he or she believes themselves to be ready and properly prepared for retirement.

If you are retired, what steps did you take to prepare for this new phase of life? If you are still in the workforce, are you considering retirement at a later date? If so, which course of action are you embarking upon to get ready for life as a retiree? \

Authored by Gabrielle Seunagal

Saving Or Investing: What Is Right For Canadians?

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You have to weigh what is going to give you the best return for your financial future.  If you have a great job, good benefits, and an excess in funds, perhaps investing some of that excess is right for you.  However, if you work a traditional job and have very little left over after bills and other necessities–saving that extra might be the smarter choice.  60% of Canadians appear to be saving more for their retirement, in comparison to others who are choosing investing.  Remember though, some Canadians don’t have enough money left over to do much of anything with, but this can be changed too.

BlackRock, a well known global investor recently polled 2000 Canadians and 52% of those saving for retirement were between 25 to 34 years of age.  Older Canadians are saving for retirement as well, but out of these groups, none are really saving wisely, or seriously weighing in on investment plans.  When it comes to investing, it seems that a lack of investment knowledge is the problem.

Below, you’ll find various considerations to make when it comes down to choosing to save or invest.  It is important to point out that age is one of the primary reasons for so many Canadians not going the investment route.  It is seen as too risky.  However, if you invest in what you know, what you’ve researched, and what seems almost certain to give you a return–you’ll find this is the wise decision!  The below tips will possibly help you find some solid footing when you’re debating what is right for you.

Tips To Help Canadians Make The Right Financial Choice

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  1.  A middle-class Canadian couple should begin by crunching their numbers and determining what it is they are going to need to have a comfortable retirement.  If they are already in the income bracket of $42,000 to $72,000 should easily be able to invest and still have a nice nest egg for retirement at the same time.  So, again, beginning to analyze finances is the first tip that should dramatically make a difference.
  2. Weigh in on low interest rates and consider inflation!  These are critical key factors when you’re trying to choose between saving and investing.  What is going to give you the better return, and what is going to secure your retirement comfortably?
  3. You do need to consult with a financial adviser if you’re not meeting your target goals!  Too many think it would be a waste of time, but the fact is only 38% of Canadians utilize a financial adviser, which is a huge mistake.  This is especially true when looking at the economic disappointments so many feel burdened by.
  4. Pay attention to your personal economy!  This is often overlooked–more to the point, commonly overlooked. The economy can tell you a lot about what direction to go in financially.  So, think about your job, your earnings and where you want to be in 20 years!