Retirement accounts are essential tools for building financial security in the future and offer tax advantages (either at the time of initial investment or at the time of withdrawal). The power of compounding interest over the years of your employment can provide you with a great deal of wealth in retirement. There are several types of retirement accounts available and each kind has its own set of rules, tax benefits, and limitations. Understanding the differences can be confusing, so I've put together a quick visual to compare the main types available to most people:
It's important to note that because of their tax advantages, retirement accounts have restrictions on when you can make withdrawals. You aren't allowed to take money out (with a few exceptions) until you are 59 1/2 years old.
If you think you'll need to take money from your investments before then, or don't want to be limited by retirement account rules, you can open an individual or joint investment account. These are called "non-qualified" or "non-retirement" accounts. They are funded with money you've already paid taxes on (like a savings account). You don't pay taxes directly on the money you withdraw, but you will pay taxes on any earnings if you sell an investment or receive dividends.
Each type of account has its own unique advantages and disadvantages, and the right one for you will depend on your individual financial situation and goals. We can help you assess your needs and choose the best retirement account for your situation.
In conclusion, it is never too early or too late to start saving for retirement. By taking advantage of the different types of retirement accounts available, you can build a secure financial future for yourself and your family. If you have any questions or would like to learn more about retirement planning, please don't hesitate to reach out to us. We are here to help you every step of the way.