Understanding Different Kinds of Retirement Accounts | Cleveland Bradley County Teachers Federal Credit Union

Have you started thinking about the future? Maybe the future to you only means looking ahead to the weekend, or counting down the days until your next vacation. Whatever your definition of the future is, there is never a wrong time to start planning for retirement.

If you just started your first job, or even if you are several years in, retirement can feel like a far away place that you have plenty of time to prepare for. The sooner you start preparing, though, the more you can save and the better your days beyond work will be.

When it comes to saving for your retirement, every little bit counts and there are lots of ways you can go about it. But what is the best kind of retirement account for you? Get to know a little bit about some common ones so that you can make the best choice.

Employer Accounts

When considering how to save for retirement, the easiest place to look is with your employer. If you are a new hire or you are in an open enrollment period, often your employer will bring in representatives to chat with about available options. Even if you aren’t sure you are going to opt in to your employer’s plan, chat with someone about it so you are aware of all your options.

Most employer-provided plans are contribution-based, which means you grow them by depositing money from your pay every month. These plans are very easy to set up and maintain; once you have your deductions set, you can basically forget about it while your future savings grows.

401(k) and Roth 401(k) plans are the two most common kinds of contribution based options that employers provide. Roth 401(k) plans do not have income restrictions, while a standard 401(k) reduces your taxable income, which means you will owe taxes when you withdraw from the account in retirement.

Most employers will match a certain amount of contributions, so it is always wise to set up your account with enough coming out of your payroll to get the free money being offered.

Individual Accounts

If you are self-employed or would like to have more control over your retirement fund, there are plenty of individual retirement accounts you could invest in. These are long-term savings accounts that, like an employer plan, you contribute to on a regular basis; however, the total amount you can contribute is limited each year.

When you opt for an individual retirement account, or an IRA, you can choose a couple of different routes for growing your money. IRAs are offered through banks, investment companies and brokers. Once you start investing, you can opt to put your money into the stock market, bonds or mutual funds. You can also choose a self-directed IRA that allows you to make your investment decisions.

No matter what you choose, saving for retirement is always the right thing to do. You can build a strong future by starting early and consistently putting money aside. Create a retirement account that is perfect for you so you can get back to dreaming of the future weekend and your upcoming vacations.

Want to create a retirement savings plan that works for you? Contact us to get started.