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What's the Difference Between an IRA and a 401k?
One of the most common questions I get from readers is, "What's the difference between an IRA and 401(K)?"
If you're an athlete, 401(k) sounds like it should be the length of some torturous marathon. Of course, IRA might evoke images of the Irish Republican Army.
Definition: Hardship Withdrawal
A hardship withdrawal is when a 401(k) account holder removes funds from her retirement savings because of circumstances like job loss, facing home foreclosure, or overwhelming medical expenses. While withdrawal is permitted during those tough times, the account holder cannot get away from the 10 percent tax penalty incurred when the funds are removed.
According to The Wall Street Journal, several 401(k) plan administrators reported a noticeable increase in hardship withdrawals this year compared to last.
Your Two Cents: Have You Started Saving For Retirement?
There are a number of vehicles available to help us save for retirement. Maybe you're participating in your employer's 401(k) plan, you're saving in a separate IRA account, or you're using a combination of different accounts. Have you started saving for your golden years?
Definition: 401(k) Debit Card
A 401(k) debit card is deceivingly like the debit cards you're familiar with, except the money is drawn from your retirement savings and must be paid back to yourself with interest — essentially, it is a loan against your 401(k). You're responsible for making punctual payments, and if you miss one, you risk having to pay early withdrawal penalties.
While you'd be paying interest now, you'd really be borrowing from your future self.
Women Need to Save More to Support Their Longer Lives
It may seem counterintuitive that you're presented with retirement savings options the moment you get your first job. You just started working and you're asked to consider your life when you've stopped working for good. That's reality folks, because unless you have a family fortune to count on or make serious dinero that lets you worry less, it can take your working lifetime to save enough to live during retirement.
Retirement Account Focus Review
Over the past several weeks we've discussed different retirement options and choosing the right plan for you. We've also looked into selecting investments for your account, how much you should save for the future, and important decisions you might face when you have a retirement account. Since saving for retirement is one of the most savvy things you can do, in case you missed any of them I've rounded up all of the retirement tips.
Retirement Account Focus, Part VIII
Some workers who have been affected by the mortgage and credit crises have been borrowing from their 401(k) accounts in order to keep up with current expenses and pay off credit card debt. When you sign up for a 401(k) plan it comes with an allowance that tells you it's an option to take a loan from your account.
You might be thinking that this isn't a big deal, and the money is yours so borrowing it from yourself shouldn't be something worth talking about.
Ask Savvy: Should I Choose a Roth 401(k) or a Traditional 401(k)?
My girlfriend, a 25 year-old Human Resources Associate, manages to pay her Manhattan rent and save for retirement. She just got a great new job and asked me what direction to take with her new 401(k). Her employer offers a traditional 401(k) plan and a Roth 401(k) option, and she's not sure which one would be best for her.
Retirement Account Focus, Part III
Many of you have been asking about whether or not now is a good time to invest because the market hasn't exactly been steady. It's understandable that you're protective of your hard-earned money and don't want to see your account dip because of a down market, but that's not what you should focus on when thinking about your retirement investments especially. I have an opinion of market timing that not everyone shares, but it's one that has worked for some serious professional investors.
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Retirement Account Focus, Part II
You already know the importance of investing in a 401(k) if your employer offers one, but what if that's not an option for you or you've already invested as much as your company will match? This is where an individual retirement account (IRA) comes in to play and there are two types: Roth IRA and Traditional IRA. Tax structure is the biggest difference between the two options.
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