A 401(k) plan gives participants little choice. The company will have selected the fund manager. The fund manager will decide how to invest the employees’ money—and the employees can watch it grow.
Benefits
The benefit is that you’ll have choice. You’ll be able to check performance, take advice and suggestions, and choose the IRA and the investment company you want. You should also find that the fees are lower than they are on many 401(k) plans.You’ll then be able to put money into that fund on a tax-preferred basis. While the contributions that the company makes to your 401(k) don’t reach your bank account until you retire, you will have to make the payments into your IRA directly from your bank account. You’ll feel the money going out.
But you should be able to write off that contribution as a tax-deduction. Like the 401(k), contributing to your IRA lets you put money away for the future and only pay tax on it when you receive it.
Tax Benefits
The tax benefits of those contributions can also be limited. As your annual income rises over $66,000 or $105,000 for couples filing jointly, the value of the IRA deduction falls if you also have a retirement fund at work.The Epoch Times Copyright © 2022 The views and opinions expressed are only those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.