We’ve been talking all about saving for retirement for the last few weeks, how to save, where to save, and all the different options you have when it comes to stowing money away for this career long goal. But is there a BEST way to save? Is one superior to another? The 401(k) is one of the most known options after all, is a 401(k) the best way to save for retirement?
This question is multifaceted and needs to be looked at from several different angles. For starters, what options are available to you? Do you have an employer who offers a 401(k) plan? Are you eligible to contribute to a Roth IRA or Traditional IRA? Maybe you have a different type of retirement plan, or, if you’re self employed you may not have one established at all.
If you’re working for a large employer, it’s very likely that you have a 401(k) or other similar type of plan available to you and this is something that you should be taking advantage of. In 2022, the maximum contribution to a 401(k) plan is $20,500. If you’re able to contribute that much to your plan, it’s a good idea to do so. Remember to monitor the investments of these funds and align them with your retirement goals.
If you’re self employed or a business owner, saving for retirement is something that should take precedent in your business plan. Some options available to you are a SEP IRA, a Simple IRA, and a 401(k). These plans all have pros and cons and are totally dependent on the type of business you own, the size of your company, and the contributions you’d like to make to your employee’s accounts.
After you’ve decided on your employer’s retirement plan or you’ve established one of your own, now you can see how much leftover cashflow you have to save in outside accounts.
If eligible, this may be an IRA or Roth IRA, or it could be as simple as saving in a brokerage account. While taxable, a brokerage account allows you to stow money away and invest in the market, putting your money to work for you and taking advantage of compound interest.
No matter your situation, saving for retirement is incredibly important. While there isn’t one “best” way to save, there are many different vehicles for all situations, and it’s important to find the strategy that works for you.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.