When it comes to saving money for your retirement years, you should actually start while you are still young. After all, the more money you have saved, the better off you will be later on down the road.
There are a few different ways to save money for your golden years. You don't have to save a ton of money at first either because as long as you put it in the bank, you can draw interest on it. This is great because as long as you don't touch it until retirement, you will be living pretty comfortably for your remaining years.
Here are two different ways to save for retirement and the differences between them.
401(k) Retirement Plan
A 401(k) retirement plan is actually one you will get from your employer if they have it available for you, and they should. This type of retirement plan works by your employer taking so much money out of your paycheck and putting into a savings plan for you. Most companies have this plan available for you and your best bet would be to take advantage of it.
This is because once you are ready to retire, as long as you didn't borrow against it, you will have a good chunk of money to live comfortably on for the rest of your life. Another good thing about the 401(k) is that your employer might even match what you put into it which will be double the money for you when retirement comes.
IRA or Individual Retirement Account Plan
An IRA or, in other words, an Individual Retirement Account plan is a retirement plan for you that has absolutely nothing to do with your employer. This type of retirement plan is one you set up for yourself through your bank.
Although this is different from the 401(k) because of this and because the bank won't match it like an employer does with a 401(k), this is good because you can choose between a few different investments with this option.
They include stocks and bonds, mutual funds, or even Certificates of Deposits, or CD's. Also, if you track your investments with the IRA, and don't agree with how they are performing, you can rearrange them yourself.
Differences between 401(k) and IRA retirement plans
The main difference between 401(k) and IRA's are that one works with your employer while one works with your bank. Also, one is taken out of your paycheck and may also be matched by your employer.
Although these two retirement plans have their differences, they also have some things in common. For example, they are both taken out of your taxable income, although one is taken out of your paycheck and one is deposited into your IRA retirement bank account once per year.
Rollovers and Roth IRA's
Ever heard about rollovers and Roth IRA's? What this means is that you can rollover your IRA into a gold IRA and you can also convert your 401(k) over to a Roth IRA account if you leave a job that offers this. This is especially a good idea if your next job doesn't offer a 401(k) plan.
Why should you do this? Because Roth IRA' are not tax deductible. This means you won't pay any taxes on your earnings at all.