However, fewer employers offer Roth 401 (k) accounts compared to traditional accounts, so if you don't have access to one, Ramsey recommends starting with the traditional account. Once you've invested enough to earn your employer's match, Ramsey suggests investing the rest of your money in a Roth IRA. In fact, Ramsey says you should first invest in a Roth 401 (k) if your employer offers one. If your company doesn't provide a Roth 401 (k), then it suggests putting enough into the traditional 401 (k) to get the employer's matching funds and then directing the rest of your contributions to a Roth IRA.
Orman also urged employees to maximize 401 (k) Roth when available, and to use Roth IRAs when they are not (after earning a matching employer contribution). A simplified employee pension (SEP-IRA) is another retirement plan option for small business owners or self-employed individuals, offering many of the major tax advantages of a traditional IRA. Setting up automatic IRA contributions will require additional paperwork, but it's worth spending time to ensure you save money for retirement on a consistent basis. The best way to open a Roth IRA is with the help of an investment professional who will meet you face to face.
In the retirement investing game, knowing the differences between a Roth IRA and a traditional IRA can help you create a winning game plan. Traditional IRAs are funded by pre-tax money, so you must pay taxes on any money you withdraw in retirement. Then, as soon as that money is in your traditional IRA account, ask your investment professional to convert that IRA into a Roth IRA. Taxable investment accounts (such as a brokerage account) offer something that classic retirement plans, such as a 401 (k) or IRA, don't offer, and that's flexibility.
They are trusted investment professionals from Ramsey who can guide you through all your retirement options, including creating a Roth IRA account. Roth accounts, including Roth 401 (k) and Roth IRAs, require you to contribute after-tax money to them. If you file a joint income tax return and at least one of you has taxable income, you can both contribute to your own separate Roth IRAs. If your income exceeds eligibility limits, it's good for you but bad for your ability to open a Roth IRA.
And listen, if the market is having a bad day, don't panic and get all your money out of your Roth IRA investments. And you can't keep the money parked in your traditional IRA forever, you have to start making withdrawals at age 72 (Uncle Sam wants his fair share).
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