Individual Retirement Accounts are a great way to save for retirement, and any taxpayer with earned income (from wages or self-employment) can fund an IRA. Your IRA contributions may be tax-deductible. There are Traditional (deductible), Roth, and non-deductible IRAs. Which one is best for you depends on your income, whether you are covered by a group retirement plan at work, and whether you prefer a tax deduction now or tax-free income in retirement.
Employers often provide 401(k) savings plans as a benefit for employees. Participants can save up to $15,500 per year in tax-deferred contributions. Every dollar you contribute reduces your taxable wages, thereby lowering your taxes. (The limit rises to $20,500 per year if you are age 50 or older.) Employer often provide matching funds, helping employees to grow their retirement savings faster. Maxing out your 401(k) is a great first-step to ensuring you are saving enough to retire.
