There are a lot of employees who are on 401(k) plans and IRAs of their choice, and these give them many tax advantages to save for retirement. You should be knowledgeable to make the most out of these. it will fully make sense to leverage retirement account options to maximize your benefits. One of the biggest advantages of retirement planning funds is that the employer matches your contributions to some extent, so you get a double advantage. This is easy money that offers you immediate returns, too, in terms of tax savings.
Robert Nico Martinelli explains retirement benefits
In light of the employer matching contribution, as we discussed above, it will actually give you about fifty to whole 100% of the contribution every year, and up to a maximum of 3% to 5% of your annual salary. In order to optimize the retirement planning benefits, the expert recommendation by Robert Nico Martinelli is to invest in both 401(k) and IRA. He advises the right way to do it as follows.
- Try to max out the match in 401(k): As we may know, 401(k) is one of the top choices of employers offering various kinds of matches. If you reach the maximum free money in it, you can try investing in IRA too.
- Max out IRA: You may try to turn to IRA if you have maxed the 401(k) match. You can also opt for IRA if the employer is not offering 401(k) or a match. The expert advice also supports Roth IRA as it offers many benefits.
- Next try to max out 401(k): If you have maxed out the IRA as you save more, you can again go back to 401(k) and then add more to reach the maximum limit of the annual contribution.
The earliest you start with your investment for retirement planning is the compound wealth you will be building. Also, you will have many tax advantages, which will help amass the wealth you have much quicker. Whatever approach you take, the ideal strategy for securing your financial future is to top out your retirement accounts, with which you can save maximum tax legally every year.
The Solo 401(k)
It is also known as Solo-k and Uni-k, and this plan is designed for business owners or individual work persons. As the business owner is both the employer and employee, in this case, the deferrals you can make are up to $20,500 and also a non-elective contribution up to 25 percent of the annual compensation, which makes the contribution of up to $61,000 for the businesses. However, this does not include the catch-up contributions.
Traditional pensions
The traditional pensions are DB or defined benefit plans, which is the easiest to handle as only a little money is required for you to put in as an employee. Usually, these pensions are funded fully by the employers and offer annuity benefits to the employees after their retirement. However, the DB plans are now getting outdated, and only very few companies offer the same.
To conclude, Robert Nico Martinelli points out that traditional company pensions are now so rare that you need to plan your pension funds individually. For this, you may take advice from a knowledgeable and professional retirement planning advisor.