How to optimize your 401k retirement savings plan with a Roth IRA plan?

A modern retirement savings plan is not only important for people who want to retire soon. The earlier you start to think about your retirement savings plan, the more time you have to find your best strategy. While a basic 401k retirement savings account is already a good way to increase benefits, some additional plans can be very useful as well…

Therefore, when it comes to highly compensated employees like full-time employees (employees earning over $100,000/year) a 401(k) may not be the best retirement plan because those employees cannot commonly save at the maximum allowable rates. When considering an IRA, there are two types to consider, the traditional IRA or a Roth IRA, each have distinctive characteristics. According to the “IRS” (2015), “a traditional IRA is a way to save for retirement that gives you tax advantages” (Traditional IRAs).

The advantage includes that a traditional IRA can be partially or fully deductible depending on an individual’s circumstances. That is why the 401k savings plan still is maybe one of the most chosen retirement savings plan offered by employees.

The 401k as the basis of a great retirement savings and the best way to save income tax

retirement savings plan

The question is not wether one or the other savings plan is best. Maybe both retirement savings plan like all traditional IRAs are best to make the retirement the best time of your life. But this does not mean that it does not make a difference. It depends on your personal attitude and your needs.

roth ira savings plan

Roth IRA – The flexible part of a retirement savings plans

A Roth IRA account might be a great contribuation towards a more flexible savings plan. While, as of 2014, an individual could contribute up to $5,500 into their Roth IRA all tax free. Roth IRAs also have other benefits such as no mandatory withdrawals and saving during retirement. Unlike with a traditional IRA, Roth account holders do not have to start withdrawing contributions by the age of 70 1/2.

What if retirement savings plan would be affected by law in the future?

If a new legislation would change current retirement savings plans it would not affect current retirees and those nearing retirement – benefits for those now 55 or older would be untouched. Neither would it increase the retirement age above current law, increase payroll taxes or reduce annual cost-of-living adjustments (COLAs), now or in the future.

An additional retirement savings plan: A question of your individual savings ratio

People in this decision stage are usually concerned in savings for the future for children’s education, retirement etc. As the savings Ratio can be easily explained by the amount of money a person saves as a percentage of their total income. And that is why some people might be satified with a simple one account savings plan. But the more you tend towards a higher savings ratio, the more you are going to think about an additional account.

A family father might want a additional savings perspective. Not only the risk would be reduced, even more important, his children would receive far more in benefits. Under the combined plan a 25-year-old male who takes advantage of the personal savings account option, could possibly end up much better and receive 19% more in benefits than promised under the existing system, based on historical averages for conservative investments. Today’s retirees and those nearing retirement will receive their benefits just as they expected.

Finding the best option for your retirement savings plan with a retirement calculator

This will guide me on how to save wisely to meet my retirement objectives. An online calculator will help me to determine my saving target. I will also work out to update the calculation year so that I can ensure that I am on the track. The factors that determine my retirement budget include the amount of money I require to live my later years, the time I have to save the amount and the type of investment tools and account I have to employ to achieve retirement goal.

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1 thought on “How to optimize your 401k retirement savings plan with a Roth IRA plan?”

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