Retirement savings accounts are the best way to start preparing for retirement now. If you have a 401K with your employer, you probably don’t need one, but if you are in danger of losing your job or your employer doesn’t provide you with one, it may be time to consider opening a retirement savings account. There are numerous types of retirement savings accounts, but they are not all the same. It’s not just a matter of putting money aside. With retirement savings accounts, you save money through investments and as your investments sit there waiting for you to retire, they grow. Certain accounts have penalties for withdrawing early and will have fees. Other accounts can be invested in before taxes, allowing for even larger growth. It’s never too late to start saving for your retirement. The best retirement savings account options include IRAs, Roth IRAs and health savings accounts. Read on to find out more.
Top Retirement Savings Accounts
- IRA
- Roth IRA
- Health Savings Account
IRA
An IRA is one of the most popular types of individual retirement accounts. Available from a number of different investment brokers like TD Ameritrade, this type of retirement account allows you to invest in your retirement while a team of a managers help you choose the right investments and meet your savings goals. Anyone can contribute to an IRA, up to $5,500 per year and the money will grow tax-free because money is invested before taxes are taken out. If you have a 401K, you can contribute to both accounts. If you earn less than $71,000 you can at least partially deduct your contributions from your taxes. Through a variety of investment sources, you can watch your money grow and have more money saved at the time of your retirement.
Highlights:
- Contributions made before taxes
- Some contributions may be tax deductible
- Anyone can open one
Roth IRA
A Roth IRA is another type of individual retirement account with much different rules. With a Roth IRA from brokers like Vanguard, contributions are made after taxes, so when you withdraw your funds your withdrawal is not taxed as income after you turn 59 1/2. On the downside, you cannot deduct your contributions from your taxes. Regardless, your money in your Roth IRA can grow tax-free. An advantage over traditional IRAs is that you can withdraw at any time without penalty. There are certain income requirements for a maximum contribution such as making less than $131,000 individually or $193,000 if married. Best of all, you can even make contributions after you turn 70.
Highlights:
- Investments grow tax-free
- No penalty for early withdrawal
- Contributions made after taxes
Health Savings Account
A health savings account is similar to an individual retirement account but is meant specifically for health expenses during your retirement. Individuals with a high deductible health plan will qualify to open a health savings account from an investment bank like HealthSavings Administrators. Contributions to a health savings account are made before taxes are taken out, much like an IRA. An individual can contribute up to $3,350 per year, while a family can contribute nearly twice as much. Money withdrawn from this account can only be used on necessary medical expenses. When you turn 65, you can withdraw money for non-medical expenses, but you will have to pay taxes on that money as if it were income.
Highlights:
- Contributions made before taxes
- For those with high deductible health plans
- Can withdraw for any reason at age 65
Conclusion
If you are planning your retirement, know that there are a variety of options for your future. An IRA account from TD Ameritrade will allow you to make tax-free contributions, while a Roth IRA from Vanguard allows you to make contributions after taxes so that you aren’t taxed later. A health savings account is the best way to save money on inevitable medical expenses. Check out any of these retirement savings account option to learn more.