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“If I have a 401k from my work, do I need to also have an IRA or Roth IRA?”

Today’s question is about different types of retirement accounts:

The question is:

“If I have a 401k from my work, do I need to also have an IRA or Roth IRA?”

 



Transcript:

A 401k is the most popular way that Americans save for retirement. And with the high savings limit in a 401k, and company match you may receive, it may seem that that is all you need.

But, there can be advantages to using other types of accounts.

You may want to consider a traditional IRA in addition to your 401k if you have poor investment choices within your 401k, such as high expense mutual funds, or if you have a higher income today. However it is important to note that it is almost always best to take full advantage of your company match before using other savings accounts.

 

You may want to consider a Roth IRA, if you have a lower income today than what you expect in the future, have poor investment options in your 401k, or are young and have a few decades still to save for retirement.

 

Since it is impossible to predict future tax rates and your future income levels, the safe answer for most investors is to allocate some money into a 401k or traditional IRA, and also some into a Roth IRA since Having some money in a roth account during retirement can provide great flexibility to reduce your tax burden during retirement.

 

Matt Hylland